Those who have been waiting for the monetary policy issue to come to the forefront in this presidential campaign finally got the moment they have been waiting for this weekend during Jeb Bush's appearance on WMUR television in New Hampshire.
In response to a question from a voter about whether foreign currency manipulation had put American manufacturers at a disadvantage, Governor Bush turned the question around: "You can make a case that in the last few years, given our monetary policy, that we've been manipulating our currency," Governor Bush said. "We've never had a time where our central bank is just printing money like nobody's business. And that depreciates our currency. It lowers our interest rates and depreciates our currency."
Mr. Bush went on to talk about other ways to help American manufacturers and other businesses, including lower taxes, less restrictive regulations, and a better-educated skilled workforce.
The left-leaning site Vox conceded that "Bush's broader point is essentially right." It even conceded "easy monetary policy has likely made the dollar less valuable than it would otherwise be." So far, so good.
But Vox made two other points that were off. First, it claimed "the dollar didn't actually decline much at the height of the Fed's 'quantitative easing' policy between 2009 and 2013." It backed that up with a chart showing something called the "trade-weighted U.S. dollar index." Yet if you measure the price of a dollar in terms of how much gold it can buy, the depreciation is clear, as this chart shows. The dollar went from being able to buy about one 800th of an ounce of gold to being able to buy only a mere 1900th of an ounce. After the easing slowed, the dollar recovered some, but at a value of one 1200th of an ounce of gold, it's still worth nearly a third less than it was worth ten years ago.
Second, Vox claims "while devaluation is sometimes viewed as a zero-sum 'currency war,' the reality is that aggressive monetary easing can benefit everyone." Well, it "can." But it also frequently doesn't, as shown by a string of historical examples, from Venezuela in 2014 ("economic production has slowed and shortages of all types are widespread. Stores are often out of basic products such as dish soap or corn flour," the New York Times reported) to Weimar Germany, which ended badly for pretty much all concerned.
This is not an endorsement of a gold standard or a suggestion that Jeb Bush should endorse a gold standard or call for ending the Fed. But it is an encouragement for Mr. Bush and the other candidates to confront this issue on the campaign trail. A Fed with a balance sheet that has grown to $4.46 trillion today from $869 billion on August 8, 2007, raises significant issues about democratic accountability, risk, the value of the dollar, and the size of government. Talking about them on the campaign trail isn't improperly "politicizing" the Federal Reserve. It's providing a service by educating the electorate about the risks. And it's preparing the groundwork for a strong-dollar presidency, which, as Kennedy and Reagan both understood, is a key to economic growth.