Submitted by Wayne Jett, Mar 14, 2008 17:30

Thank you for pressing the point that the dollar is the essence of the financial crisis. The perceived crisis in credit has developed after four years of excess liquidity injections and excess restraint on growth by the Fed's funds rate hikes. In 2007, the FOMC tapered off on its liquidity injections, and the private misjudgments in the credit markets that flowed from excess liquidity began to bind some lenders and borrowers. The pains of those parties have caused the Fed to try to ease the pain in the credit markets, and the dollar has fallen steadily lower.

In that context, the dollar (and every American and foreigner who use it and rely on its value) should not be sacrificed to save those who relied on loose credit standards by lenders. Those mistakes should be paid for by those who made them.

At $1,000/oz gold, the dollar has more than 60% inflation built into it that must be processed through the economy and prices within the next ten years. At 6% inflation annually or more, Fed policy will impose much higher funds rates and stagnant/negative growth on the economy unless U. S. monetary policy is reformed.

Under the circumstances, President Bush should take executive action to save the dollar. The president should order the Fed to allow the markets to set all interest rates (float the funds rate) and to target the dollar's value at $500/oz gold, managing its Treasury securities portfolio to drain and add liquidity as necessary to hit the value target.

The recurring financial crises are caused by flawed U. S. monetary policy. Reformed policy will provide an honest dollar and a sound foundation for global economic growth.

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