Bottom Dollar

Conservatives claim Obama's policies are weakening the dollar. Let's examine the evidence.

By Daniel GrossPosted Monday, Jan. 11, 2010, at 11:03 AM ET

It's an article of faith among many analysts that the U.S. dollar is in trouble. The response to the financial crisis, they say, has debased the currency. The culprits are the Federal Reserve, which slashed interest rates to zero, printed money, and vastly expanded its balance sheet, and the Obama administration, which has run up huge deficits by embracing Keynesian efforts to stimulate the economy.

As early as July 2008—months before the presidential election—McCain economic adviser Douglas Holtz-Eakin blamed the weak dollar on Obama. Here's a typical piece from Conservative Daily News arguing that the administration is weakening the dollar to boost exports. Niall Ferguson, author of this declinist, anti-Keynesian Newsweek cover story, last October said the dollar could fall another 20 percent against the euro over the next few years. John Paulson, who made billions betting against subprime mortgages, as chronicled by Gregory Zuckerman in the The Greatest Trade Ever, is bearish on the dollar too.