Broken Records and Strong Dollar Policies

We have had an exceptionally strong dollar since the recession hit. We’ve had dollar devaluing during the first part of the aughts and had growth – crappy growth, but exceptional growth in comparison to what we have now. This is not a coincidence. If we had tighter monetary policy and a strengthening dollar during the early part of the 2000s, growth would have been much worse and we’d be in an even worse situation today.

fredgraph

As a matter of fact, “the dollar rally was produced by tighter than expected money, just as in late 2008 (Scott Sumner).” The reason the dollar has fallen since its peak in 2009 was because of fears of a weak US economy. If people want a strong dollar, they should seek it by allowing the US to return to a higher growth trend instead of letting it stagnate in limbo.

Investors, seeing no end in sight to the recession because fiscal stimulus will not be tried because of the Republican Party and monetary stimulus will not be tried either because of the nebulous inflation hawks and political pressure, have decided that it’s better to invest in the safety of treasuries (even though rates are at 60 year lows) than invest in stocks and other vehicles.

Seriously, anyone who wants to see the end of the recession needs to explain exactly how we get there. The only people blaming what the Democrats have done since Obama took office for the recession are the typical POLITICAL power players. Both investors and businesses are worried about the state of the economy itself, not regulations nor taxes. The only reason anyone is concerned about what the government is doing is because of the political power games the Republicans have been playing the past two years – threatening to shut everything down every time someone they don’t like sneezes.

What are the solutions? Specifically, what regulations need to be taken off the books to see the recession end? The regulations that were enacted two years AFTER the economy crashed? How do you tie those new regulations, most of which haven’t actually gone live, to something that happened in the past? Threats of marginal tax increases? History has proven that marginal tax rates don’t have as much power to deter investment as some would like to argue.

So no fiscal stimulus, no monetary stimulus, nothing. Just cut regulations, cut taxes, and do nothing. Easy money allowed the US to grow in the last decade during the Bush years. It was nothing BUT easy money that led to whatever growth we had, instead of the long recession we would have had if Greenspan had kept interest rates at a higher level. We tried deregulation during those years. We tried cutting taxes during those years. They did nothing to help growth.

People who want us to try the same old attempts at spurring growth that the Republican Party tried under Bush need to come up with new excuses for espousing the same old, tired arguments. They make no sense whatsoever and have brought about no reason for positive reinforcement that they’d work.

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