One of the questions hanging over our politics today is whether President Obama appreciates the impact on his own legacy of the collapsing dollar. The futures market yesterday was putting the value of the dollar below a 1,500th of an ounce of gold on what the Bloomberg News attributed to concerns about “escalating U.S. debt.” There’s a lot of blame to go around in respect of the debt, including to Congress, which has the constitutional authority to regulate the value of the dollar. But it is not the portraits of the leaders of Congress that are put on America’s currency. The portraits that normally go on our currency are portraits of the presidents,* whose treasury secretary signs the American scrip.
Yet as president, Mr. Obama has never given us a major speech in which he talks about how he views money or what he thinks of what has become of the dollar during his presidency. The value of the greenback has, for the record, fallen more than 43% from the 853rd of an ounce of gold that it was worth at the end of the day on which Mr. Obama acceded to the presidency. That is less of a decline than the 68% slide in the value of the dollar under President George W. Bush. But Mr. Bush was in office eight years. The steepness of the plunge under Mr. Obama is breathtaking.
All the more so in light of the things the future president was saying back when he was a candidate. A glimpse of it can be seen in a video on YouTube of Mr. Obama meeting with the editors of the Sentinel newspaper, which is issued at Keene, New Hampshire. The editor, Jim Rousmaniere, put the question of the collapsing dollar in a straightforward way. He noted that the dollar has been in a decline and asked, “Is that good or bad?” Mr. Obama began his response by offering a long discredited theory, saying, “There are some benefits from the dollar’s decline, obviously it is just making our exports cheaper and we needed to get some balance in our trade deficits.”
Then Mr. Obama signaled that he comprehended that there’s another side of the question. “You haven’t seen huge spikes in inflation as a result of the dollar’s decline,” he said. “There’s some stickiness there. But it’s not going to last forever. So the downside is we’re going to see inflationary pressures as a consequence of this.” The candidate went on to say that he was “less concerned” about the day to day gyrations of the dollar than “by the underlying economic fundamentals that are causing the dollar to decline,” which he characterized as “that we’re spending more than we produce, and you know we are losing our competitive edge.”
The federal budget, he asserted, was “entirely out of whack.” He said “we’ve been benefiting from this huge credit splurge, and we’re not preparing ourselves for the long term competition that we’re going to be engaging in with China and India and other countries.” He went on to tell the editors of the Sentinel that he’d be “worried if there was such a big decline that at some point you started seeing a huge spike in interest rates and you know that had a depressing effect on the U.S. economy … ” Meantime, he would be more focused on the tax code, health care costs, education, and “getting our handle on energy so that we’re not sending 800 million to a billion dollars every day to Saudi Arabia and Kuwait.”
President Obama would no doubt be the first person to note that a lot happened between 2007 and his swearing in at the start of 2009. But no matter how one discounts for that, the difference between what Mr. Obama said and the way his policies have unfolded couldn’t be more stark. He has done nothing but increase spending, while making it ever harder for our energy producers who exploit our own onshore and offshore oil reserves. The collapsing dollar has done nothing for our trade deficit, and the costs for food and fuel are soaring. It took a revolt by the Tea Party movement to spur any kind of action on deficits.
And still no preparedness to share with American voters — or the rest of the world, for that matter — his thinking about the dollar. A while back something called the Dollar Redesign Project started a contest to redesign the greenback on the theory that the dollar was so weak it that what had to be done is “rebrand” it. The winner of the 2010 submissions featured a piece of one-dollar scrip with a huge picture of Mr. Obama. It became something of a joke on the satirical Web site drinkingwithbob.com. Yet sooner or later Mr. Obama’s reluctance to share with Americans his view on the dollar is going to lay him open to a challenge from the Republican candidates. And what better time than with the value of the dollar down to a 1,500th of an ounce of gold and the political conventions but 15 months away.
* There are exceptions, such as Benjamin Franklin, whose portrait is on the c-note.