"Don't mention the dollar!"

Does failed businessman and now President George W. Bush actually know more about economics than Princeton prof and now Fed Chairman Ben Bernanke?

Before you react to this by saying, "Who cares? They're both idiots!" (that's a given), please understand I'm just trying to be provocative (or maybe just smart-alecky) in light of the day's news.

US President George W. Bush
said Wednesday the record low of the dollar against the euro was "not
good tidings" and that he backed a stronger dollar.

Asked on PBS television, if he wanted a stronger dollar, Bush replied: "I would, absolutely."

Bush noted that the plunging dollar, which hit an all-time low of
1.5570 dollars to one euro in trading on Wednesday, had raised costs
for US consumers, including for imported oil.

"Those aren't good tidings, if you're for a strong dollar like I am," Bush said about the exchange rate.

"One reason I am for a strong dollar is because … I think it helps deal with inflation," he said.

"Our dollar doesn't buy as many barrels of oil as it used to, and so therefore it's more expensive for the American people."

Leave aside the strong-dollar blather for the moment; we know that's just for show.   What I'm struck by is that last point about inflation — a point evidently lost on Bernanke.  Let's go back to last fall, and one of Bernanke's regular taffy pulls on Capitol Hill with Rep. Ron Paul.  As recounted at the Mises Institute website:

Bernanke responded to Congressman Paul's remarks on inflation by
saying that the Fed is acting under its Congressional mandate to
promote full employment and maintain price stability. Bernanke's remark
prompted Congressman Paul to open a second Austrian front in his war of
economic theory with the Fed Chairman. Congressman Paul pointed out
that the value of the dollar is falling not just domestically, but also

How can you do this and pursue this, the policy that you have,
without further weakening the dollar? There's a dollar crisis out there
and people's money is being stolen; people who have saved, they're
being robbed.

Congressman Paul continued:

I mean, if you have a devaluation of the dollar at 10 percent,
people have been robbed at 10 percent. But how can you pursue this
policy without addressing the subject that somebody's losing their
wealth because of a weaker dollar?

Fed Chairman Bernanke, however, saw no such problem. According to Bernanke:

If somebody has their wealth in dollars and they're going to buy
consumer goods in dollars and it's a typical American, then the decline
in the dollar, the only effect it has on their buying powers, it makes
imported goods more expensive.

Simple, huh?  Want to maintain your purchasing power?  Just buy domestic goods!

Of course if those domestic goods are made with the aid of imported capital inputs — like, say, I don't know, energy — that might have just a wee impact on the price of those domestic goods.  But when you're a Princeton prof and your head's in the clouds, maybe that sort of thing is just too down-to-earth.

We're in deep doo-doo when That Man in the White House has a firmer grasp on how a falling dollar affects real people than the pointy-headed Fed Chairman. 

No wonder there's an evident diktat at the White House that only the President and Treasury Secretary Hank Paulson are authorized to speak to reporters about the value of the dollar.


When I first read about this, I was reminded of an episode of Fawlty Towers, in which the staff was implored: "Don't mention the war!"  Or in the case of White House press secretary Dana Perino, "Don't mention the dollar!"

Let's set the scene: a White House news conference last Friday.  After a general briefing on the economy by a couple of Team Bush's economic advisers, in which they studiously avoided talking about the dollar, it was time for Q&A with Perino.  Fox News reporter Wendell Goler, demonstrating that even state-controlled television is getting restive in the final year of the current regime, had the temerity to bring up an issue we addressed last week:  OPEC's statement that a weak dollar is a major factor behind high oil prices. 

Q I’d like to follow up on their refusal to talk about
the dollar, if I could. I mean, we’re in a kind of a bad situation
here, when OPEC says the reason for $105 or $106 a barrel of oil is the
falling value of the dollar — and you won’t address that issue. Where
do we go to find out who is right?

MS. PERINO: Well, as he just said, the Treasury Secretary is where
you go to talk about the dollar. It’s a longstanding policy that
predates this administration, and I’m not going to change it today. But
Treasury can talk about it.

Q I don’t expect you to change it, but I do expect you to be able
to say whether OPEC is completely wrong about this, or whether there is
at least something to their claim that the dollar is responsible for
the high price of oil right now.

MS. PERINO: Wendell, I’m under strict instructions, and
have been from the beginning, to not talk about the dollar, and I’m not
going to get fired to satisfy your question.

Now really… Is there a "longstanding policy that predates this administration" forbidding White House flacks from talking about the dollar?  Or is it a command of more recent vintage, aimed squarely at the dumbest White House press secretary of my lifetime?

Besides, at this point, does anyone give a rat's rear end what Hank Paulson says about the dollar?  We already know what he'll say, all evidence to the contrary notwithstanding.

All of it would be comical if oil weren't piercing $110 this morning — to say nothing of gold finally breaching four digits.  Falling dollar, rising resources.  Sounds like a trend.

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