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.
Blogs For Victory 
Mark,
I agree with you, we need a Strong Dollar.
It seems those in the tourist industry and other big business are the ones who are driving our dollar down.
one thing i don’t understand Mark – you firmly support the Bush Administration. Under the Bush Administration the economy – by all indications – is in a recession and the dollar is incredibly weak. Now – why would McCain who simply wants to continue the failed Bush policies be the one to strengthen the dollar. If we simply extrapolate to what Bush has done to the economy (steal from the poor to feed the rich) what exactly brings you to to believe anything different will failed. Here is a hint for you – supply side economics doesn’t work
Here is a hint for you – supply side economics doesn’t work
LS, then what economic policy, in your opinion, does work? Since there are only two basic policies WRT taxes (i.e. either higher taxes or lower taxes), can you cite some examples where raising taxes had a more beneficial effect on the economy than lowering taxes has had?
This is not a trick question. If you know something that the rest of us do not, please enlighten us.
“Americans, particularly people of color, losing their homes and their nest eggs of wealth”
It’s ok, Jack, you can call them black people. They don’t mind.
And, what exactly are John McCain’s that will fix our economy and allow the dollar to rebound and how to they differ from the current administration’s failled economic policies? Or am I wrong to call them failed policies?
Bush Tax cuts affect all Americans. Its not just for the rich, but everyone. The working class get a cut, tax credits for children were increases under it as well. My % of fedreral taxes went down under Bush, from the % paid under Clinton.
McCain is the only acceptable replacement for Bush. The democrats did’nt put out acceptable candidates this season. People should not take Obama or Hillary serious.
You can have low interest rates and low inflation if you have a high ratio of free reserves / deposits, such as 1960 Germany. This means there is a large amount of increased savings to back the investments. You destroy a currency when you artificially lower interest rates by buying securites with new checkbook money unbacked by real savings.
There’s a big diffrence between free market reduction in rates and fed manipulated reduction in rates.
To say that the current Fed policy of printing like mad won’t hurt the dollar, shows you havn’t read a newspaper in 8 months. John McCain idea of 0% interest rates has been tryed in Japan and is the current policy in Iran, in both situation it has led to economic stagnation.
Also the moral hazard that constant bailouts introduces is why these big banks aren’t afraid to be crazy leveraged. If they have money they loan it out. If the shit hits the fan the fed just bails them out. Heads they win tails they break even. Why not gamble big, you can’t lose.
A economic downturn represents a real loss in value. Someone has to take a hit. Government bailouts through fiscal or monetary policy just shift some of that hit to the uninvolved working taxpayer.
Yea credit will get tight if the government does nothing, and probably hurt the ecomomy, but that’s because all of the taxpayer backed insurance that fractional reserve demand deposits have massively expanded that particularly unstable investment instrument to hundreds of billions of dollars.
I wish republicans would go back to trusting the free market…
My % of fedreral taxes went down under Bush, from the % paid under Clinton. EricT
Does your dollar go as far as it did under the Clintion administration?
Ron Paul
Sunny,
You got me there! That would be a pretty intense math problem, to say for sure.
Energy cost were lower then, but Gore, Hillary talking about Kyoto treaty and Carbon credits?? I would not take a chance with Clinton’s wife. or Obama. Sounds like a lot of taxes and new government programs with them, New energy taxes are ones we surely DON’T need. The democrats seem to want to cut drilling here and increase royalty payments on drilling leases. I don’t think that putting Hillary in is going to bring back the energy prices of that era.
I’m just waiting for that rightie-poster who, on another thread, actually claimed that a weak dollar isn’t necessarily a bad thing.
If I can find that post, I’ll link it. It was a couple of weeks ago here.
It’s truly sad to see what our government-run school system has wrought; put the word “weak” in front of “dollar” and you get equally weak arguments.
When I was in surgery a month or so ago the operating theatre was set to a balmy 53º, lowering my temperature whilst the surgeons played patty-cake with my innards was defiantly beneficial, however, if my body temperature were lowered further I think even an Obamanation like Joe could see that the result is corpus mortis. Drop ~ good; Big drop ~ bad; Get it?
The value of the USD dropped by 43% against the world’s currencies between 1985 and 1995 setting the stage for the strongest period of economic growth in 35 years. The valuation of the $ against the Euro has dropped 30% over the past two years; it’s not the drop it’s the sudden drop.
We have reached, or passed the point where the weakening of the dollar can benefit exports and open markets and, although not mutually exclusive, can impact inflation. The Treasury and the Fed have focused on making funds available, and lost sight of the valuation of the dollar. The decline in the value isn’t, in and of itself a bad thing, the sudden devaluation, the perception from investors that the economy and the dollar are weakening and the subsequent withdrawal from our markets is the real challenge.
The solution is not to increase taxes, or tighten money, it’s for the economy to initiate open-market strategies; remove trade barriers, and push trade deals through Congress; don’t let our partners get caught in a bidding war waiting for Congressional approval.
The goal of economic policy shouldn’t just be growth… it should be sustainable growth. It is becoming more and more apparent that the growth that we’ve experienced these past few years hasn’t been sustainable (ergo the Market Correction that we are seeing right now). Fiscal policy works both ways, taxes are decreased to stimulate a stagnant economy, and taxes are raised to cool an over-heating economy. They are both legitimate tools of economic policy, but the political climate we have today basically makes the concept of raising taxes as offensive as a drunk gay man sodomizing a puppy in St. Peter’s Basilica. Let’s face it… if there were a 0.5% tax rate and we were running a $90t deficit, there would still be people on this site bitching about high taxes… Grow up…
“and taxes are raised to cool an over-heating economy”
Frogman, you know better than that, only in a socialist utopia would this be accurate; money policy and rate manipulation cools an “overheated economy” taxation is never used to de-stimulate an economy except in south American banana republics.
The economic fluctuations are normal; when I was a young’un, ‘bout your age, my Econ Prof was explaining how the government economists tweak the monetary supply and interest rates to achieve optimal growth without inflating the values and over stimulating the market. At the time I decided to make this my life’s work; where else can I use those terms in polite society without being slapped.
The “result” of the government economists endeavors at that time was Nixon’s ”Phase Two”! Nice tweaking, boys!
Around 1974 I learned laissez faire; and like the free range chicken; once free I never looked back.
Tax cuts for the wealthy are simply this: Government sanctioned redistribution of income.
The vast majority of wealthy individuals who enjoy this windfall stick the redistributed income into a bank and sit on it. They didn’t get to be rich by SPENDING money.
People who work for a living and wish to rectify this situation are known as the “Trickled Upon.”
Pansy,
How do you find your way home when the birdies eat the breadcrumbs?
“The decline in the value isn’t, in and of itself a bad thing, the sudden devaluation, the perception from investors that the economy and the dollar are weakening and the subsequent withdrawal from our markets is the real challenge.” – Dasein Libsbane
Unless you are on a fixed income, or you lack economic mobility(like the working poor)…, then you feel the brunt of inflation.
Dasein, since over half of these toxic waste mortgages are held by the big 5 financial firms, who have built up an averaged leveraged spread of over 20X since the huge monetary expansions since 2001, and I’m sure they’re paying all their CEO’s hundreds of millions of dollars, do you think there might be any moral problems with putting these losses on the backs of workers and people on fixed incomes?
Rana, keynesianism is dying for a reason, please read an economics book written in the last 50 years.
It’s no big secret if you read fed white papers(yea I’m a wierdo) that interest rates are very much effected by the fact the the government finances such huge amounts of itself through debt. If the government would simply raise all it’s revenues through taxes, it wouldn’t need to expand the money supply in the first place, leading to all the overinvestment unbacked by real savings in the first place, and then the situation of needing to bail out overleveraged firms. Since tax rate cuts can lead to increase in revenue and rate increases can lead to drops in revenue, not to mention the alltogether negative effect of confiscating people productive efforts, the real long term solution is the hardest political goal possible, that is CUT SPENDING!!!!!!! until the government gets all it’s revenue simply from taxes.
Anna,
Assuming facts which are not in evidence; inflation is calculated on buying power and the increase or decrease in wages is instrumental to the inflation calculations. Specifically, the relationship of wages to productivity is the fuel that drives inflation. You are assuming that the softened dollar will facilitate inflation, or that the two are inexorably tied; they are not. A gradual revaluation, up or down can be inflation resistant.
That said if the devaluation of the currency is accelerated, as it has been over the past two years, inflation is the natural outgrowth. For this reason, I advocate a free market solution; on that we agree. Stick a fork in John Maynard once and for all.
The “toxic” loans are held by many money-changers because they’ve been bundled and resold, that’s the reason for the worldwide jitters; no one knows for sure who actually holds what. Inasmuch as the companies are market driven, the amount they pay their CEO’s is irrelevant.
Please don’t make the stupid statement ala Pansy that the wealthy aren’t “workers” factually, because the wealthy move more money through lending institutions they are the ones hit hardest when rates rise in response to bad business decisions. fixed income and working poor are affected least as they have a finite income to loan ration that precludes massive interest payments on new loans after the rates go up. If these nit-wits signed ARM’s I don’t feel the least bit sorry for them, they lied on their applications and the (free range) chickens are coming home to roost.
“If the government would simply raise all it’s revenues through taxes, it wouldn’t need to expand the money supply in the first place,”
Oh, Puh-leeze! The economy grows, the population grows, the market grows; the money supply has to grow ~ simple economics, you’re smarter than that, there are much better arguments for restricting the money supply than the government prints money to pay its bills tripe. I’ll give you time to think about it.
These people are devaluing the dollar for a reason. The US deficit shrinks as the value of the dollar decreases.
What they didnt expect is the housing snafu. Its putting people out on the streets, destroying families. Forclosures turn empty homes back to banks, investments hedged for inflation through artificially high values on housing in the last 10 years will snatch the money from the wealthy, banks go bankrupt.
The filthy rich’s greed for the almighty dollar will be thier downfall, and with them, the US Economy will hit lows that have not been seen in about a hundred years.
A loaf of bread for a days wages anyone? Yup, bread is over 2 dollars a loaf now. Corporate earning soar while our wages diminish.
Capitalism without responsibility is suicide.
So you want Bill Clinton back. His policy was a strong dollar all 8 years.
Odd I thought this was a right wing web site?
Sorry, snide comment aside the G7 accuratly described the Clinton Administration’s policy as “sound dollar not “strong dollar. This implies a favorable currency/exchange policy rather than Snow’s investment minded “strong dollar” policies.
It’s now up to the Congress to do something instead of mindless bickering and support free trade agreements.
Does it bother you that our very weak dollar is a direct result of Republican policies?
Which “Republican Policies” would that be?
C’mon, show us how smart you are, cause and effect, Republican policy “A” caused dollar value @ “B”.
Retired Spook wrote:
LS, then what economic policy, in your opinion, does work? Since there are only two basic policies WRT taxes (i.e. either higher taxes or lower taxes), can you cite some examples where raising taxes had a more beneficial effect on the economy than lowering taxes has had?
This is not a trick question. If you know something that the rest of us do not, please enlighten us.
Arguably, the answer would be the Clinton Tax hikes.
In 1993, the Clinton Economic team voted to raise taxes, and this was met with a chorus of cries that it would tip the US into recession.
(It should be noted, that the 1994 economic downturn to this day is referred to as a “soft-landing” not a recession, because GDP growth never turned negative — the GOP led Congress of 1995 therefore had no role in engineering the economic feat performed by the Clinton economic team.)
However, those hikes were allocated to bringing down the National Debt, while at the same time Clinton pursued welfare reform (the most contentious issue during the primary as liberals cried heresy to the idea). It should be noted that Clinton did more to reduce welfare roles than Reagan and Bush 41 combined.
Because the tax increases were met with the windfall of reduced post-Cold War military spending and reduced spending on welfare, capital was freed from US debt which made it available to the private sector for investment.
Interest rates came down, the dollar rose, borrowing costs came down, and the consumer was unshackled by debt. As a result, consumer spending increased, the economy boomed, and America prospered as never before. The statistical measure of economic growth following Clinton is unsurpassed since the end of WWII.
President Bush has pursued an inflationary, deficit spending economic policy, financing an expensive war with Government debt. The result of his tax cuts MAY have put more after-tax dollars in your pocket, but when added together, the higher interest rates, and the higher commodity prices caused by the weak dollar/deficit spending economic policies have reduced net after-taxincome for most Americans, how now pay more for food, gas, heating oil, credit cards, and home mortgages.
The lesson here, for those with open mind, contrary to popular wisdom, a tax INCREASE, if targeted to a particular economic goal CAN actually benefit an economy.
’nuff said…