It seems nobody in this country wants to take responsibility for the secular decline in the value of the U.S. dollar. When Fed Chairman Ben Bernanke is asked about the currency's decline, he refers the query to the Treasury Department. When the president is asked about the dollar, he often gives the tired old platitude that the U.S. has a strong dollar policy, but his vacuous words seem more like a perfunctory utterances than a bona fide dollar-boosting strategy.
Now that the U.S. dollar is once again caught up in a vicious secular bear market, losing nearly 16% of its value since March alone, the Treasury Secretary is once again opting to plead the fifth. Even worse, he claims that last year was a good example of global confidence in the currency, even though it was down over 8% for the year.
Can he really be counting on another collapse in the global economy to pull the dollar out of its downtrend? To use the previous year as an example of confidence and strength in the country, or the currency, is spurious in nature. It illustrates that our Treasury Secretary either tacitly condones a falling dollar or has no idea what causes a weak currency.
The progenitor of our weak dollar is the skyrocketing monetary base, which reached an all-time record high of $1.86 trillion last week. The Fed's monetization of banks' assets has caused real interest rates to become negative and increased interest rate differentials with the currencies of more sober central bankers, like Glenn Stevens from Australia. In addition, our profligate spending habits have caused record budget deficits and even caused our healing trade deficit to reverse course and head higher. Unfortunately, all those trends seem firmly intact and are actually growing worse.
There is, however
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