The Brexit boon to Europe and the US

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STANFORD – Most Europeans are happy that Joe Biden will be the next president of the United States. Whether they realize that Biden’s economic policies will put the euro and Europe in a bind is another matter. The new US administration will want the euro to remain strong against the dollar in order to keep the US economy humming.With the goal of boosting spending on the pandemic response, the environment, and infrastructure, the Biden White House will undoubtedly pressure the US Federal Reserve to keep the value of the dollar low, regardless of how much more fiscal stimulus it can coax out of Congress. And having done so many favors for Donald Trump, the Fed chair, Jay Powell, will be in no position to refuse Biden.

In this context, it was a stroke of genius for Biden to appoint Janet Yellen to serve as Secretary of the Treasury. As Powell’s predecessor at the Fed, she still has significant influence there. For good reason, Wall Street is betting heavily against the US dollar for the next year or two.The best solution would be for Germany to deploy a fiscal stimulus, as this would “internalize” a good amount of EU trade, rendering the euro’s more...