I have been harping on the misguided weak dollar policy of both the Bush and Obama administrations for well over a year, but I was struck by a recent article by David Malpass with this stunning revelation: “Measured in Euros, U. S. real per capita GDP is down 25% since 2000, while Germany’s is up 4%….” Likewise in Euro terms, the S&P index peaked at 1700 in 2000 and is now at 700.
If this doesn’t begin to get our attention, what will it take? This is simply stupid; current policy is undermining our competitiveness and destroying wealth while providing international holders of dollar-denominated assets every incentive to seek another alternative as the world’s reserve currency. It is also immoral. The height of fraud that can be perpetrated on a nation’s people is to debauch the currency. Yet this is clearly at work as we continue to monetize our debt, flood the market with dollars, undermine free trade, protect big labor union interests, and defraud our bondholders.
While we’re loading the Federal Reserve with all manner of additional responsibilities for policing “systemic risk” in the financial markets, let’s not forget that the primary job of the Fed is to maintain a strong and stable dollar–all else is secondary. In all of our “re-regulating”, we need a renewed Bretton Woods-type agreement among the G-20 nations that returns the tie of the dollar to gold backing.