The Need for a Strong Dollar

Why need a strong dollar? For me, its a matter of basic fairness – those who hold a US dollar today should have a reasonable expectation that tomorrow it will still be worth a dollar. Outside of that, there are a host of purely economic reasons for a strong dollar, and Jack Kemp lays out why McCain is the man to bring us a strong dollar:

With the dollar’s weakness pervasive and the economy slowing down to a near halt, with more and more evidence of too many Americans, particularly people of color, losing their homes and their nest eggs of wealth, I believe McCain will chart a political and economic course for our nation that will do far more than just offer “hope” or “change.” I believe he will pursue policies that will actually lead to strong economic growth while ending these early stages of dollar weakness and inflation.

Those on the left will ask in response, “Don’t you have to have higher interest rates to strengthen the dollar?” Absolutely not!

As David Malpass, chief global economist at Bear Stearns, points out, “The two aren’t tightly connected. Many countries with low interest rates have had strong currencies, including the German mark in the 1960s and the euro now. The dollar strengthened in the first years of the Reagan administration when he focused on it and put in good economic policies. We should do that again. The United States is a great country, and the dollar is normally a great currency.”

McCain, I firmly believe, will do that again.

As I wrote recently, moving our nation toward a flatter, fairer and simplified tax code that is both pro-growth and pro-family while strengthening the investment climate in our country will immediately strengthen the demand for the dollar here and around the globe. McCain knows we need a tax policy for the 21st century that both recognizes the need for a competitive economy in an increasingly flattening world while encouraging capital formation and job creation here at home. His ideas for cutting corporate tax rates from 35 percent to 25 percent, expensing all investment in machinery, equipment and technology, making permanent the 15 percent tax rate on capital gains, dividends and estates while eliminating the alternative minimum tax would give us the answer to the dangerous simultaneity of inflation and recession.

These pro-growth initiatives by candidate McCain will force Sens. Obama and Clinton and their political advisers to say, “Oh no, we can’t cut tax rates, we need higher taxes – but only on the rich.” But soaking-the-rich rhetoric and policies to redistribute wealth will weaken the U.S. investment climate, further weaken the dollar and, in the end, exacerbate stagflation.

McCain’s thesis of noninflationary growth will have the winning edge against Obama and Clinton’s “antithesis.” I truly believe this, among the other issues, like free trade, immigration reform, national security and a strong foreign policy, accompanied by McCain’s pledge of strong appointments to the Supreme Court like Roberts and Alito, will give Republicans the opportunity to both win the White House and gain seats in the U.S. Congress.

The dollar became the world’s reserve currency because of all the world’s economies, that of the United States could be best relied upon to be governed by rational ideas and be ruled by law, rather than governmental whim. People are wary of the dollar today for a variety of reasons, but not least of which is the worry that come January, 2009, the United States will not be as friendly an investment climate as now. With the Bush tax cuts set to expire, the worry is that if you keep your money in the US, you’ll find yourself hit with a rather large tax penalty because liberals in the United States want to tax “the rich” (which actually doesn’t mean taxing real rich people, but works out to taxing productive people and capital).

With Democrats in control of Congress and at least an even money chance that a tax and spend ultra-liberal will be sworn in come January, it might be a good time to hedge your bets on the United States and move your money into Euros…or into oil futures. On the other hand, a McCain victory – especially if accompanied by more GOPers in Congress – would be seen as a signal that taxes will remain low and America will remain open for investment.

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26 thoughts on “The Need for a Strong Dollar

  1. Christian Wright March 14, 2008 / 4:26 pm

    Does it bother you that our very weak dollar is a direct result of Republican policies?

    25. Dasein Libsbane | March 14th, 2008 at 11:03 am

    Which “Republican Policies” would that be?

    C’mon, show us how smart you are, cause and effect, Republican policy “A” caused dollar value @ “B”.

    The Policies that support the philosophy of the free market devoid of regulation. The sub-prime crises was predicted before it even go off the ground, and Greenspan did nothing and the Republicans (who controlled all three branches of government) did nothing.

    I knew this was coming in 2003. In fact, I thought it would hit us by 2005. Money is too important to be trusted to bankers. This nation needs regulation.

  2. Ricorun March 14, 2008 / 5:08 pm

    Dasein: Specifically, the relationship of wages to productivity is the fuel that drives inflation.

    Given that, you’d think the powers that be would get more serious about analyzing productivity in all its dimensions. After all, considered economy-wide, energy expenditures account for a big chunk of the overall input that “fuels” overall GDP. Yet energy productivity is an issue that has, up to now, been seriously overlooked.

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