NCPA - National Center for Policy Analysis

GOOD START FOR CHANGE AGENTS: RESTORE DOLLAR

March 6, 2008

If Sen. John McCain wants to run as a candidate of change, and if he's interested in distancing himself from President Bush on some issues, he should reverse the declining fortunes of the Bush wartime dollar, says Lawrence Kudlow, host of CNBC's Kudlow and Company.

Right now the greenback is in virtual free fall:

  • In the last month the dollar has fallen 5 percent.
  • The past two years it has declined 30 percent against the euro.
  • In the past six months it has dropped nearly 20 percent against 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 there's genuine worry about inflation, says Kudlow:

  • Over the past year and a half, consumer price increases have climbed from 1.5 percent to nearly 4.5 percent.
  • Prices are rising today faster than average hourly earnings for the non-management work force.

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, says Kudlow.  Yet because the United States has neglected its currency, letting it 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, says Kudlow.

Source: Lawrence Kudlow, "Good Start For Change Agents: Restore Dollar," Investor's Business Daily, March 4, 2008.

 

Browse more articles on Economic Issues