Barack and the Buck
August 8, 2008
The underreported economic news of the week is that Barack Obama favors a stronger dollar. Even better, he thinks a stronger greenback would help to reduce oil prices.
That at least is what the Democratic Presidential candidate told a town hall forum in Parma, Ohio, on Tuesday. "If we had a strengthening of the dollar, that would help" reduce fuel costs, he said, according to a Reuters dispatch ignored by most of the media.
This ought to be a bigger story. In linking the dollar to oil prices, Mr. Obama is pointedly at odds with the Bush Administration and Federal Reserve, both of which blame high commodity prices on supply and demand, despite falling demand due to slower global growth. Fed officials -- in particular, Vice Chairman Donald Kohn -- have expressly rejected any strong link between the dollar's collapse and the oil price surge since last August.
This conveniently absolves the Fed and Bush Treasury of responsibility for the consequences of what has been their destructive and all but explicit dollar devaluation strategy. If the Illinois Senator rejects greenback debasement, that's the best news to date about Obamanomics.
Reuters also quoted Mr. Obama as saying "The way to strengthen the dollar is for us to get our economy back in shape." On that point, he has it backward: Strengthening the dollar would help the economy -- by making the U.S. a destination for capital, and especially by reducing the inflation in food and energy prices that has pounded the American middle class. Those price hikes may yet tilt the economy into a recession it could otherwise avoid.
We don't know who is whispering in Mr. Obama's ear about the dollar, but he's on to a rich political vein. Americans know instinctively that something is wrong when the Canadian loonie is worth more than the greenback. Over to you, John McCain.
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