James Pethokoukis writes, The next big political issue? The U.S. dollar
The aftershocks of the global financial crisis may now be propelling the dollar back to the political forefront. The greenback’s continuing slide makes it a handy metric that neatly encapsulates America’s current economic troubles and possible long-term decline. House Republicans for instance, have been using the weaker dollar as a weapon in their attacks on the Bernanke-led Federal Reserve.
A recent Rasmussen poll, for instance, found that 88 percent of Americans say the dollar should remain the dominant global currency. Now, the average voter may not fully understand the subtleties of international finance nor appreciate exactly how a dominant dollar has benefited the U.S economy. But they sure think a weaker dollar is a sign of a weaker America.
And that’s the political problem for the Obama administration. Its benign neglect of the dollar is another example of an economic policy — along with TARP and the $787 billion stimulus — that the White House thinks is helping the economy, but many Americans find wrongheaded.
As you may recall, rumors abound on whether Gulf Arab states were in secret talks with Russia, China, Japan and France to replace the dollar as the currency used on oil trading.
As James points out, the huge deficit is a big threat to the stability of the dollar. The bad thing is, every aspect of fiscal policy the current administration is implementing will increase that deficit.