Rick Santorum Says Obama “Has Devalued Our Currency,” Ignoring Actual Exchange Rate History

In the course of his announcement speech this morning, former Senator Rick Santorum (R-PA) engaged with the important debate over monetary policy in a curious way, ranting that President Obama “has devalued our currency and devalued our culture, debased our dollars and our moral currency.” This was followed by something about abortion. The connection between exchange rates and reproductive rights isn’t immediately apparent, and thinking about the issue in those terms is likely to lead to bad public policy.

To start with the facts, it’s simply not true that the value of the dollar has declined in an important way under the Obama administration. Consider this chart of the past thirty years of exchange rate history:

As you can see, the George W Bush administration was associated with a large and persistent fall in the value of the dollar. Then the global financial crisis led to a sharp increase in the value of the dollar, and since that time we’ve returned to the late-Bush level. It would be interesting to know what abortion policies or general devaluation of our culture Santorum thinks is responsible for this. What’s more, we may be continuing the general Bush-era trend. That’s because several large developing countries—most notably China, India, and Brazil—are growing quite rapidly. An increase in the value of their currencies is a natural response to increased production and increased wealth, and it mandates a fall in the value of other major global currencies.

The truth of the matter is that what America needs right now in economic terms is further increases in the price of foreign money, especially Chinese money. The People’s Republic of China pursues a policy of deliberately undervaluing Chinese money in order to make Chinese-made manufactured goods artificially cheap. This gives America some cheap manufactured goods, but it exacerbates manufacturing unemployment and reduces living standards in China.