In narrower terms, the current guardian of dollar value is Maestro Alan Greenspan. He has spent a distinguished career at the Fed protecting greenback purchasing power and holding down domestic inflation. For those proliferating dollar bears on Wall Street, including a number of supply-siders who have turned into inflationist worrywarts, do you really think Greenspan is about to reverse his long-held convictions? Only a few years ago the rap against Sir Alan was deflation. Having corrected that mistake, do you really think he?s embarked on a massive inflation? Highly doubtful.
As Mike Churchill, an insightful supply-side analyst, recently put it, Greenspan?s ?key reference point for valuing the dollar is the gold price . . . if gold is rising because some investors think the Fed will back away from interest rate hikes, this view is probably misguided.?
In other words, the Fed will gradually remove the excess dollars they appropriately created following the dreadful 9/11 attacks on the U.S. As they remove this emergency liquidity and as pro-growth tax cuts are made permanent in Bush?s second-term tax-reform program, the future value of the U.S. dollar is likely to rise, not fall.
Since the presidential election total shareholder wealth has increased $430 billion, or nearly 4 percent. Investor wealth is now at its highest level since early 2001, according to Daniel Clifton, the executive director of the American Shareholder?s Association. This is because pro-investment tax cuts will be made permanent, not repealed, as a result of Bush?s victory (and the increased number of pro-growth senators joining him in Washington for his second term).
The liberal chattering pundits of the old established media will continue to prattle on about budget deficits, trade deficits, a weak dollar, higher inflation, and a jobless recovery. But America?s economic future is vastly more optimistic than these negativists would have us believe. Both politics and policy are pointing toward non-inflationary prosperity. The U.S. dollar will share in this bounty.