A strong and steady King Dollar is always essential to overall free-market prosperity and economic growth. But a wildly fluctuating greenback is not.
Since last November, the trade-weighted dollar index has risen roughly 16 percent. Moreover, the dollar has jumped approximately 25 percent against the euro alone. Of course, the euro’s collapse is a function of the debt crisis in Greece and the European debt-default contagion threat. But roughly 15 percent of U.S. trade is done with the European area. So here’s my point: This huge dollar jump against the euro negatively impacts the terms of trade for U.S. exporters and the S&P corporate profits of global companies.
It’s a deflationary influence when the dollar shoots up way too fast. Incidentally, during the dollar-appreciation move that began late last year, the stock market has basically stopped advancing. In fact, since mid-April, when the dollar made another big move versus the euro, cyclical sectors like commodity materials, energy, industrials, and retailers have gotten clobbered by nearly 10 percent. There is clearly a dollar influence going on here.
Look, currency stability -- a steady King Dollar -- is what we want for growth. We need steady money. But with all these currencies fluctuating so wildly right now, it’s difficult to see how a dollar that keeps shooting higher and higher is going to be a good thing.
Then, of course, there is the related currency issue of a surging gold price. Gold, in dollars, euros, and everything else, is roaring higher. It is saying a pox on all your houses. That’s the message. Too much deficit spending. Too much debt. Too much central-bank liquidity, especially since the European Central Bank threw in the towel.
Nothing good ever came out of a gigantic gold move like this. Nothing. It reminds me of the 1970s, when gold shot from $35 an ounce to $800 across a ten-year span. Look, in just the last ten years, gold has gone from $250 to $1,230. Historically, that’s a stagflation signal. It’s not good.
We need steady money and much smaller government. And guess what? We’re not getting it.
I don’t want to see the dollar shooting up by leaps and bounds every week. I want a steady dollar. And I sure don’t want to see gold shooting up by leaps and bounds every week either. These are terrible signals. And the currency complication is screwing up the other Washington problems of too much taxing and spending and debt creation.
It’s all another big V-shaped economic worry.