October 13, 2009

Wimpy Dollars

The political issue of the strength of our currency is coming down the pike.  I've been a lone wolf on this issue for a while and finally -- finally -- some news organizations are starting to notice that our prolonged insistence on nearly non-existent interest on government debt, and massive-deficit-spending ways, have made the dollars worth less than they have been in more than a century. 

This will be a political issue in the upcoming political cycle -- and, ironically enough for me, Sarah Palin appears to be the first Republican to be picking up on it.  The upcoming j'accuse in the 2012 Presidential debate will be: "You've made our money worthless!"  (It won't matter that the process started under President Bush; this is politics we're talking about here and by 2012, George W. Bush will be a historical figure.)  The Democrats will not have the ability to stop deficit spending in any meaningful way, but they could in theory induce the Fed to raise interest rates on government debt, so the Administration could, in theory, do something to mitigate the problem. 

But I predict that they will not.  Weak dollars will be the order of the day and an issue in 2012.  You read it here first.  This time, you really did.

5 comments:

DaveBuck said...

I fear that the fact that Palin made this statement will cause democrats to automatically reject it. Watch, it will cause more people to say, "We should move towards an international currency anyway" or something that will allow them to mentally write off the issue.

Do you know of any democrats who have discussed the virtues of strengthening the dollar in the past? I'm thinking such quotes or soundbites would be useful to build a case early on for this plank from all angles before it gets spun.

Transplanted Lawyer said...

Sadly, Dave, you may very well be right. I'm confident that if Sarah Palin were to say that the sky was blue on a clear summer day, there are plenty of Democrats who would explain why she had no idea what she was talking about.

zzi said...

"I'll gladly pay you Tuesday for a hamburger today"

A Potted Plant said...

Keep in mind strengthening the dollar will make American exports less attractive. The current ex-im trade imbalance suggests the American dollar is still too valuable.

Transplanted Lawyer said...

That's a fair point, APP. But I don't mind a trade deficit as long as we have a healthy enough manufacturing sector (preferably one with lots of high-tech products not available anywhere else) and substantial investment in foreign industries, which would go along with strong dollars.

It's worth pointing out that "strong dollars" sounds better than "weak dollars" but that's not necessarily the right value judgment to make in all cases. It happens that I think strong dollars are better for us at this point in history. But I'll concede that there might be circumstances in the future in which weak dollars would be better for us.