The View From 1776
Saturday, April 12, 2008
Federal Reserve policy has already created a dollar crisis.
In an April 9th editorial, the Wall Street Journal opines:
‘You don’t have to predict it. We’re in it.” Thus did [former Federal Reserve chairman] Paul Volcker respond to a question Tuesday about whether he still predicted a “dollar crisis” in the coming years…
The world has been staging a run on the greenback, with damaging results if it continues. Mr. Volcker noted that when “concerns about recession are rife,” the central bank will be tempted to “subordinate the fundamental need to maintain a reliable currency” to the impulse to shore up a flagging economy. The danger is that you lose both battles, as the U.S. did in the 1970s, and wind up with stagflation.
The present climate, Mr. Volcker told his audience, reminded him of nothing so much as the early 1970s. Then as now, certain commodity prices were rising fast