THEY NEVER LEARN: A disturbing rite of passage for new Treasury secretaries is, within the first weeks of office, to make a Kinsley Gaffe -- accidentally speaking the truth when silence would suffice. I suspect this is because they simply can't comprehend the notion that a single offhand remark can move markets -- until they utter an offhand remark that moves markets.

For reasons that remain a mystery, the Bush appointees inevitably screw up on the "strong dollar" policy:

"Mr Snow's remarks that he was not concerned by the recent fall in the dollar - which he said was within normal ranges - made perfect economic sense. Unfortunately, they also betrayed a worrying lack of market savvy and an inability to learn from the mistakes of his predecessor, Paul O'Neill....

If Mr Snow is to follow the example of one of his predecessors, then Robert Rubin or Larry Summers would be much better choices than Mr O'Neill. Both realised little could be gained by expressing an opinion on the dollar's moves. If Treasury secretaries express concern at a fall in the dollar and then do nothing they lose credibility. If they appear unconcerned, they risk fuelling the move. As a result, whenever asked about the dollar Mr Rubin and Mr O'Neill simply intoned the mantra that they supported a strong currency, and left the market to draw conclusions about what this meant."

As a result of Snow's comments, the dollar is now at a 4-year low against the Euro.

Contrary to the conventional wisdom, both Robert Rubin and Larry Summers did make similar gaffes when they first came to the Treasury department. However, they quickly learned on the job. Paul O'Neill did not learn on the job. Let's hope Snow is a fast learner.

[Why should the U.S. support a strong dollar? Doesn't this worsen our balance of trade?--ed. Yes, but it has compensating benefits. A strong dollar helps to keep inflation low (by keeping the price of imported goods down) and interest rates low (by attracting capital inflows). Low interest rates and low inflation contribute to robust economic growth]