The Wall Street Journal's editorial in respect of the weakening dollar yesterday — "The dollar's fate is very much in our own hands," was its point — reminded us of an encounter we had some years ago with Senator Moynihan. It occurred when the senator stopped by to visit with the editors of the Forward. The senator, who was then chairman of the Finance Committee, was asked about the responsibility of the Congress, under Article I of the Constitution, to fix the value of the dollar (and the other weights and measures). We were startled to hear Moynihan declare that controlling the dollar was, because of the great size of the private capital markets by that stage in history, beyond the power of the Congress to control. It was such a stunning, incorrect assertion that, though we loved Moynihan, we went out that November and cast our vote for Bernadette Castro.
The Founding Fathers of America were so clear in respect of their understanding of where they intended to lay responsibility for the dollar that the world knows where to look. So the fact that the imminent accession of the Democrats in the Congress has been met with an a round of currency jitters is a signal to watch. Not that the Republicans were any great role models. The dollar on their watch collapsed to the point that today one is lucky if a greenback will purchase one 637th of an ounce of gold, not even close to half what it would have purchased when, say, President Bush took office. All the greater the impact of the latest flight from the American currency. Some will insist blame attaches to Chairman Greenspan & Co. But it was Congress that created the Federal Reserve. Hence the attention to the Democratic accession.
These columns are not indifferent to the exchange rate of the dollar in terms of foreign scrip, like the Euro or the Communist Chinese currency. The Wall Street Journal noted yesterday that it is heartening to hear Secretary Paulson asserting that a strong dollar is "clearly in our nation's interest," a remark the Journal reported Mr. Paulson making to reporters traveling with him in London. Rather than a "strong" dollar, which strikes us as a relative term, we prefer "sound dollar," which strikes us as making a reference to the dollar's definition against something real. The other day a federal judge actually issued a ruling saying our currency was illegal because all denominations were printed in a size undistinguishable by a person who is blind. But how is even a sighted person, once he has a dollar in his hand, able to predict what, under American law, it's going to be worth a few months hence?
So we'd have preferred to be hearing, from either Secretary Paulson or Chairman Bernanke or the Congress, some reference to a connection between the dollar and something real — gold, say, or even to a price rule. In the months ahead, after all, people are going to be charting the dollar and watching where it stands, not only against other currencies but also against gold. Between now and 2008, we will be in a period in which, if the dollar begins to fall, the blame is not going to attach to the Republicans, who will no longer control the Congress, but to Democrats. If the dollar goes down further from here, it might as well be renamed the Pelosi. Going into a transitional election with a falling dollar is not something the Democrats will want to do. It wasn't all so long after Moynihan rejected the notion that the Congress could live up to its responsibility for the dollar that the voters revoked the party's mandate on the Hill.