Thomas Jefferson’s Quintessential Aspiration for the Dollar

One of the longstanding aphorisms invoked by American monetary and finance officials is that the Federal Reserve never comments on exchange-rate issues involving the dollar and the Treasury never comments on the Fed’s monetary policy. This disconnect is fraught with internal contradictions that go beyond defending agency territory. The United States not only has the world’s most important central bank. It also issues the world’s dominant reserve currency. Therein lies the monetary dissonance: American citizens who use the dollar for their daily transactions continue to incur the financial and economic consequences of monetary debasement through inflation.Yet their nation’s currency has ostensibly been strengthening over the last five years in terms of its foreign exchange value against the currencies of 26 major American trading partners, according to the Nominal Broad United States Dollar Index published by the Federal Reserve Bank of St. Louis. Reconciling the dollar’s value as defined by its diminished purchasing power at home with its powerful role abroad and outsized impact on foreign trade and financial capital flows poses a major challenge for new Federal Reserve chairman, Kevin Warsh.The chairman appreciates the importance of cooperation between the Fed and Treasury at moments of global financial duress; he also wants to safeguard the Fed’s independence. Treasury Secretary Scott Bessent, for his part, brings professional experience and broad perspective to the matter of defining monetary integrity both domestically and internationally.The Federal Reserve chairman, Kevin Warsh, on June 17, 2026, at Washington. AP/Rod Lamkey, Jr.“I think people have the wrong notion of what a strong dollar means,” Mr. Bessent stated at the Reagan National Economic Forum held in May. “It isn’t the price on the screen, every minute, every week. What a strong dollar means is that we are doing the right things to set our economy on a good course.” Mr. Bessent highlights the importance of sound economic policies on taxes, regulation, energy, and trade. He believes that a strong dollar means people “feel safe and secure” and have confidence about the trajectory of the American economy. They want to hold dollars so they can have “high real returns.”It matters that the dollar’s fundamental strength be consistent with American values of self-government and individual economic liberty. In the Constitution itself, the nation’s Founders granted responsibility for upholding America’s monetary standard not to the Treasury, nor a central bank, but rather to Congress.As noted by Roger Sherman, a changeable medium of exchange was “no better than unjust weights and measures” and “condemned by the laws of God and man.” Sherman, by the way, is the only person to sign all four of America’s founding-era state papers: the Continental Association, the Declaration of Independence, the Articles of Confederation, and the Constitution. Secretary Scott Bessent on Capitol Hill, May 6, 2025. AP/Jose Luis MaganaActions taken by the Federal Reserve should accordingly be in conformance with constitutional principles. By ensuring that the dollar is a meaningful and dependable measure of value, the Fed would meet its mandate for stable prices and secure the dollar’s role as the world’s most trusted currency. How, though, does the Fed deliver price stability without undermining the very economic policies that are empowering the private sector to increase output through productive economic growth? And how can monetary policy decisions help maintain a stable dollar in foreign exchange markets even as trade rivals seek to undervalue their own currencies?Were fighting inflation merely a matter of raising the Fed’s target policy interest rate — which is primarily done by boosting the rate of interest paid to commercial banks on the reserve balances they keep on deposit at the Fed — it is easy enough for any voting member of the monetary policymaking committee to enhance their reputation as an inflation hawk by supporting more restrictive interest rates. Yet does that action mesh with the dollar’s role in the global arena? The Fed’s own chart referenced above shows the spike in the dollar’s exchange rate against its trade partners’ currencies that happened in late September 2022 — only days after the Fed enacted an aggressive 75-basis-point rate hike to fight inflation. Another significant spike occurred in mid-January 2025 when incoming strong U.S. economic data was interpreted by currency market traders as meaning Fed officials would pause interest rate cuts.In both cases, the global value of the dollar was a byproduct of the assumption that Fed officials are wary of robust economic activity and predisposed to fight inflation through restrictive interest rates to curtail demand. The headquarters of the Federal Reserve at Washington, D.C. Farragutful via Wikimedia Commons CC3.0Such thinking explains the perverse response of financial markets to positive news on employment and output — as if solid American economic growth, which increases supply, is inherently inflationary. Mr. Warsh’s resistance to market speculation fueled by the cacophony of contending voices among Fed governors and the heads of Federal Reserve district banks is well warranted. The credibility of the dollar internationally enables the United States to have tremendous leverage in dealing with geopolitical matters; an invaluable instrument of soft power, it enhances our influence over global financial and economic developments. But the dollar’s value in foreign exchange markets should be based on fundamental American economic policies — and not the false flag of boosted interest rates. Thomas Jefferson was convinced that American money would provide such a stable and dependable measure of value that it would become a worldwide standard. As Secretary of State, Jefferson submitted to Congress his plan for establishing “uniformity in the currency, weights, and measures of the United States” with the goal of achieving universal standards that would be invariable and “accessible to all persons, in all times and places.”It is a quintessentially American aspiration — wherein our nation’s money provides an honest measure of value to facilitate voluntary trade and commerce by conveying accurate price signals across borders and through time — and one that pays tribute to the entrepreneurial energy of free people.

Thomas Jefferson’s Quintessential Aspiration for the Dollar

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