If Sen. John McCain wants to run as a candidate of change, he should reverse the declining fortunes of the Bush wartime dollar. America’s prestige is on the line.
With inflation spurting in the United States, the sinking dollar is being ridiculed both at home and overseas. The falling dollar is perceived as a sign of American decline – which is a very bad sign.
Right now, the greenback is in virtual freefall. In the last couple of months, the dollar has fallen 5 percent. Over the past two years, it has declined 30 percent against the euro. In the past six months, it has dropped nearly 20 percent versus the yen. Measured in terms of a basket of industrial currencies, the dollar is now below its 1970s level.
Consequently, for the first time in a decade, I’ve become genuinely worried about inflation. Over the last year and a half, consumer prices have climbed from 1.5 percent to nearly 4.5 percent. Prices are rising today faster than average hourly earnings for the non-management workforce. As real incomes go down, so goes the consumer.
The worldwide commodity boom in oil, metals and food is largely a function of the global spread of free-market capitalism and unprecedented international economic growth – especially among emerging-market economies in China, India, Brazil, Russia and Eastern Europe. Yet because the United States has neglected its currency, allowing it to drop lower and lower, good news on global growth is translating into bad news on U.S. inflation.
Inflation is the single biggest cause of recession, and it may well be tipping the U.S. economy into negative territory. It’s also the cruelest tax of all. Inflation robs consumer and wage-earner purchasing power. It erodes business profits. It reduces the real worth of investor portfolios.
Think of this: The capital gains tax is not indexed for inflation. So the effective tax rate on real capital gains has jumped from 22 percent to 37 percent since September. This inflation-tax penalty has emerged despite the fact that no new tax legislation has been passed in Washington. It also has occurred exactly while the stock market has fallen about 15 percent.
And if all this weren’t bad enough, the falling greenback is becoming a symbol of American decline. Our enemies around the world are pointing to the unreliable dollar as evidence of American weakness – weakness as a financial power, weakness as a national-security power. Does an unreliable currency symbolize an unreliable nation?
Something must be done to reverse this, and John McCain is the man to do it. Remember, McCain was a foot soldier in the Reagan revolution. Strengthening the dollar isn’t only good financial policy, it’s an act of patriotism. A patriotic dollar will show our jihadist enemies and the rest of the world that there will be no declinist America.
Indeed, the dollar is still the world’s reserve currency, with the vast majority of financial transactions running through the dollar. By placing the U.S. dollar front-and-center in his campaign and emphasizing that there will be no fall-off in dollar responsibility if he’s elected – McCain can more than bolster his agent-of-change credentials and his standing as an economic reformer.
The time has come to end the dollar’s freefall. The time has come to end the international ridicule of the greenback. Making the dollar strong will make America strong.
It’s time to resurrect King Dollar.