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The Dollar Decline Must End

You know I’ve been crusading to save the greenback and restore King Dollar. But new entitlements that open the door to a government takeover of the health-care sector are no way to do it. Not surprisingly, as the Baucus Billmade it out of the Finance Committee yesterday, the dollar fell once again and gold jumped (closing at $1,064). Not good. Smells like the 1970s.

Just look at two ominous headlines in the news: First is the global shift out of the dollar and into commodities. Second is the dollar losing its reserve status to the yen and the euro.

In the second quarter ending in June, central banks around the world invested 63 percent of their new cash reserves into euro and yen, and put only 37 percent into dollars. Over the past six months, the dollar has lost 15 percent while gold has climbed nearly $150. If this continues, spiking inflation and interest rates will choke off the bull market in stocks and do serious damage to the economy. It could happen fast.

How to solve this problem?

In supply-side terms, cut tax rates for new growth incentives.

Meanwhile, the Fed must drain cash to remove dollars from the financial system and the Treasury must simultaneously buy dollars in the foreign-exchange markets.

And Washington must stop its explosive spending and borrowing. Some statutory — or even constitutional — limits should be set.

That the dollar is the world’s reserve currency is a tremendous asset for the United States. We must stop the fall of the dollar now. It’s a self-inflicted wound that will do great damage to American leadership and prestige globally, and to the economy here at home.

Questions? Comments, send your emails to: lkudlow@kudlow.com

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