LARRY KUDLOW: The Dollar Decline Must End

From Larry Kudlow's Money Politics comes this CRITICALLY IMPORTANT post about the decline of the Dollar as a reserve currency.

Note to Timmy Geithner: If you don't want to be remembered as the Treasury Secretary who killed the United States of America, then you'd do well to heed Kudlow's advice.

Wednesday, October 14, 2009

The Dollar Decline Must End

You know I’ve been crusading to save the greenback and restore King Dollar. But new entitlements that open the door to a government takeover of the health-care sector are no way to do it. Not surprisingly, as the Baucus Bill made it out of the Finance Committee yesterday, the dollar fell once again and gold jumped (closing at $1,064). Not good. Smells like the 1970s.

Just look at two ominous headlines in the news: First is the global shift out of the dollar and into commodities. Second is the dollar losing its reserve status to the yen and the euro.

In the second quarter ending in June, central banks around the world invested 63 percent of their new cash reserves into euro and yen, and put only 37 percent into dollars. Over the past six months, the dollar has lost 15 percent while gold has climbed nearly $150. If this continues, spiking inflation and interest rates will choke off the bull market in stocks and do serious damage to the economy. It could happen fast.

How to solve this problem? In supply-side terms, cut tax rates for new growth incentives. Meanwhile, the Fed must drain cash to remove dollars from the financial system and the Treasury must simultaneously buy dollars in the foreign-exchange markets.

And Washington must stop its explosive spending and borrowing. Some statutory — or even constitutional — limits should be set.

That the dollar is the world’s reserve currency is a tremendous asset for the United States. We must stop the fall of the dollar now. It’s a self-inflicted wound that will do great damage to American leadership and prestige globally, and to the economy here at home.

DEMS TRADE DOLLAR STATUS FOR UTOPIAN PIPE DREAM

From Breitbart.com via Drudge comes this alarming report of heavy pressure on the greenback as foreign central banks begin to shift their reserves away from the dollar.

It will be exceedingly difficult to muster up any sympathy for Democrats who lose their seats in 2010 and 2012 as a result of their economic and financial betrayal of their constituents in their mindless pursuit of Obama's utopian fantasies.

Dollar facing 'power-shift': analysts

The dollar's position as the world's leading reserve currency faces increased pressure as the financial crisis allows emerging economies greater influence on the world stage, analysts said.

A report last week in The Independent claiming that China, Russia and Gulf States are among nations prepared to ditch the dollar for oil trades has heightened the uncertainty surrounding the US currency's future.

The dollar slumped against rivals last week in the wake of the British daily's controversial report.

"The US dollar is being hurt by the continued talk of a shift away from a dollar-centric world," said Kit Juckes, an analyst at currency traders ECU Group.

"Three conclusions stand out very clearly. Firstly, the shift in economic power away from the G7 economies is continuing. "Secondly, there is a growing acceptance amongst those winners that one consequence of this power shift will be to strengthen their currencies.

"And finally, as long as the US economy is not strong enough for any rise in interest rates to be conceivable for a long time, the dollar's underlying downtrend will remain in place," added Juckes.