Bush's Disastrous Dollar Policy

President Bush doesn't talk about the dollar much, but when he does, he's got exactly one thing to say about it: "We have a strong dollar policy."

It's becoming increasingly clear, however, that Bush's "strong dollar policy" is driving the greenback into the ground.

The dollar is hitting record lows this week amidst fears that the mortgage-market meltdown will spread to other parts of the economy and as the Chinese make noise about moving more of their investments into euros. But it is the underlying dynamics of the American economy -- continued massive trade deficits and a whopping national debt -- that have put the dollar in such a precarious position.

A true strong dollar policy, aimed at increasing the confidence of international investors, would require Bush to do a bunch of things he doesn't want to do. For instance, he would have to stop borrowing so much money to fund his tax cuts and his wars. He would need to encourage the Federal Reserve to raise interest rates, rather than depend on it to keep propping up the domestic economy by decreasing them. That sort of thing.

Instead, Bush just offers the strong-dollar line, without specifics, and moves on.

Consider how eager he was to drop the subject last month during a Wall Street Journal interview:

WSJ: "[T]here has been a lot of concern, obviously, about the value of the dollar around the world, and some calls for the U.S. to put more action behind its vow that we support a strong dollar. How do you respond to them, and do you think Treasury needs to intervene at all at this point?"

Bush: "Secretary Paulson, of course, is our main spokesman on this issue, and he reflects the view of this administration that the strong dollar policy is the correct policy. And we also believe that the best way for a currency to become valued is through the market."

WSJ: "That's it?"

Bush: "Yes."

WSJ: "Is the low dollar helping the trade deficit numbers that today were pretty good?"

Bush: "The policy of the U.S. government, when it comes to the dollar, is a strong dollar policy, and that the currency -- the value of the currency needs to be set by the market."