A favorite line of Republicans in the 2012 GOP presidential primary has been to claim that President Obama is devaluing the American dollar. The surging former Sen. Rick Santorum, for instance, ranted that Obama “has devalued our currency,” while Rep. Michele Bachmann (R-MN) has said that, “in the last two years of the Obama administration, if you pull a dollar out of your pocket, you have lost 14 percent of the value of that dollar…A dollar in 2011 should be the same as a dollar in 1911. A dollar should be worth a dollar.”
Texas Gov. Rick Perry (R-TX) claimed in a debate that “it is a travesty that young people in America are seeing their dollars devalued.” Mitt Romney also chimed in to say that “people will not invest in this country and create jobs in this country for the American people if they don’t have belief in our currency.” But there’s one big problem with this storyline — it isn’t true:
Moves by the Federal Reserve to flood the world with dollars are doing little to dent the currency’s value, bolstering the appeal of U.S. assets at a time when the government needs the support of foreign investors the most.
The U.S. Dollar Index (DXY) has appreciated 13 percent from a record low in March 2008 even as the Fed kept interest rates at about zero and printed cash to buy $2.3 trillion (FARBAST) of Treasury and mortgage-related bonds, and is little changed since 1991. The International Monetary Fund said Dec. 30 that the greenback’s share of global foreign-exchange reserves rose in the third quarter by the most since 2008.
In fact, it was the George W. Bush administration that “was associated with a large and persistent fall in the value of the dollar.” As the Big Picture’s Barry Ritholz put it, “A fall [in the dollar index] from 121.02 in July 2001 to 70.69 in March 2008 — Now THATS a dollar collapse.” Of course, no Republicans were making headlines screaming about devaluing the currency then.
It’s not only those seeking the presidency that are using this line. As Bloomberg News noted, the dollar’s performance “counters officials in China, Germany and Brazil who said that the Fed’s policies were weakening the dollar. House Speaker John Boehner of Ohio and three other Republicans sent Fed Chairman Ben S. Bernanke a letter in 2010 expressing ‘deep concerns’ about the central bank’s plan to print money to buy bonds, saying it risked weakening the dollar.”
Claiming that he devalued the currency is just one more lie in a host of lies the candidates are propagating regarding Obama’s economic record. But it bears so little resemblance to reality that no candidate who uses it should be taken seriously when it comes to economic policy.