THERE is something new in financial markets: followers of the Bush administration’s so-called “strong dollar policy” are learning the meaning of the American colloquialism “snow job”.

As America’s traders know, that means deception, accomplished by burying the listener under a meaningless flow of what Eliza Doolittle contemptuously called “words, words, words”.

When treasury secretary John Snow last week assured the world that America was devoted to a strong dollar, traders snorted “Snow job” and continued to sell dollars.

In China long lines formed at banks as depositors withdrew their dollar accounts and converted them to euros, yen or even China’s own currency.

The few dollar bulls that can be found think the decline will end soon. They expect China to relax the renminbi’s peg with the dollar, allowing the American currency to rise against its Chinese counterpart. My guess is that the Chinese authorities might allow a tiny adjustment, but not one sufficient to have a big impact on currency markets.

So Europe will continue to be hit by a double whammy, the “brutal” effect on Europe’s already sclerotic economies that has so upset Jean-Claude Trichet, president of the European Central Bank. The euro is bearing almost the entire weight of the falling dollar, making euroland exports dearer in America. Meanwhile, the Chinese currency falls with the dollar, giving China’s exporters an even greater competitive edge in Europe's markets.

This is not all bad. As Nicholas Garganas, governor of the Bank of Greece, told the Financial Times, the strong euro is offsetting the inflationary impact of higher oil prices.

Europe’s politicians have serially found excuses for their nations’ stagnation rather than reforming their labour and product markets and lowering the crushing burden of taxation.

But even for them, it is stretching things to blame the euro’s climb against the dollar for their economies’ failure to grow and for persistently high long-term unemployment. After all, so far this year the euro has risen only 3.5% against the dollar, the smallest increase in the past three years. And euroland stagnation preceded the recent dollar dip.

By contrast, the American economy is powering ahead. Industrial production rose in October to 5.2% above last year’s level. Housing starts in October were 6.4% above the previous month and 2.2% above the October 2003 figure.

Retail spending was up sharply last month. Consumer confidence is up, partly as a result of the improving jobs market, and partly because the widely anticipated post-election delay in naming a winner just didn’t happen.

Share prices are so buoyant that a New York Times headline reads “It feels like the 1990s” and one in The Wall Street Journal refers to the “current mood of euphoria”.

Indeed, we hear less talk that the Federal Reserve Board’s monetary policy authorities, having raised interest rates to 2%, might stop there. Not only is the economy doing well, but inflation picked up last month. Wholesale prices rose in October by 1.7%, the largest increase in 15 years. Energy prices led the way — no surprise there. But food prices (+1.6%), floor coverings (+0.8%), and construction machinery (+2.7%) also jumped.

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