The Fed’s Weak Dollar Policy Is Hindering an Economic Recovery: John Tamny
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The U.S. economic recovery remains weak. The June unemployment report released Friday disappointed again with just 80,000 payrolls added, leaving the jobless rate unchanged at 8.2 percent. GDP growth has stalled from a respectable 3 percent in the fourth quarter of last year to a meager 1.9 percent in the first quarter 2012.
While a divided Congress has done very little to promote an economic recovery over the last couple years, the U.S. Federal Reserve has taken extraordinary measures to keep the U.S. economy from completely falling off a cliff. The Fed's first and second round of quantitative easing have since come and gone, but its 'Operation Twist' program was recently extended through the end of the year to keep long-term interest rates low and encourage borrowing.
According to John Tamny, editor of RealClearMarkets, it is the Fed's excessive monetary easing that has kept a U.S. recovery from materializing.
"My view for quite some time has been that when we talk about economic problems in the U.S. we are really talking about symptoms and symptoms of the weak dollar," says Tamny. "If the stated objective of your monetary policy is to devalue dollars, it is going to be true that investment is going to be less such that economic growth is less."
On the flip side, some contend a stronger dollar is bad for the U.S. economy. A stronger dollar would lead to fewer U.S. exports because our goods would become more expensive on the global market and our imports would rise. Tamny does not agree with this argument.
"Imports are beautiful, it is poor countries that don't import," he says. "If devaluation or a weak currency were the path to prosperity then countries like Argentina and Zimbabwe and Turkey would be among the richest in the world."
To remedy the economy and seek a stronger dollar, he says the U.S. Treasury must announce immediately that it will pursue a stronger currency pegged to something "real." Markets will rally around this idea, he says, "and soon enough the U.S. economy will soar."
Tell us what you think! Do you think a strong or weak dollar is better for America?
