Investors worried about the dollar, as I am, should really take a look at the recent London Daily Telegraph story written by Ambrose Evans-Pritchard.
He reports an interview with Jean-Claude Juncker, the Luxembourg premier and chair of Eurozone financiers who is also known as the EU’s “Mr. Euro.” The interview strongly hints of a G7 action to halt the collapse of the dollar and bring an end to commodity speculation by hedge funds.
According to the piece, Juncker met with President Bush in the White House at Bush’s request, just before the latest G7 meeting. The two men discussed the dangers of protectionism, and Juncker apparently warned Bush of the need for the U.S. to take steps to halt the dollar’s slide.
According to Evans-Pritchard, Juncker said, “I don’t have the impression that financial markets and other actors have correctly and entirely understood the message of the G7 meeting.”
Juncker is referring to a more aggressive G7 policy statement about monitoring currency volatility. Recently, I have been writing of the need to make this even clearer, by referring to a policy of dollar appreciation. You may recall that a little over twenty years ago, the G7 clearly stated a policy of non-dollar appreciation at the 1985 Plaza Accord in New York.
I can’t help but wonder whether some kind of dollar rescue mission isn’t out there in the near-term. And I agree with Mr. Juncker that a dollar appreciation would halt speculation in energy, gold, and other commodities. As of this writing, oil’s up over a buck, trading at $118.50. Meanwhile, the euro registered another high against the dollar, finally breaking through the 1.60 barrier.
For the life of me, I can’t figure out why Sen. McCain isn’t making a big pitch for a strong-dollar policy, thereby separating himself from President Bush’s dollar-neglect. In our interview last week, I pressed Sen. McCain on this issue, but he’s not yet quite committed to monetary actions for the dollar, though he does in a general way want a strong dollar.
Incidentally, former Fed Chairman Paul Volcker -- Mr. Hard Money himself -- who endorsed Barack Obama back in February, recently said that the dollar is already in a crisis. Wouldn’t it be a hoot if Volcker persuaded Obama to come out for a strong-dollar policy? Obama could make a populist pitch to protect the purchasing power of the wages of all those “bitter” small-town folks who are clinging to guns and God in the hinterland.
A big hat tip and many thanks to my friend Jimmy Pethokoukis over at U.S. News & World Report, for noticing that I keep raising the dollar as a potential key issue in this presidential race. Food and gas prices are soaring. Big increases in the consumer price index are undermining worker wages.
So here’s the question: Which candidate, if any, is going to claim the lead on strong-dollar policy?