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It's Not the Debt Ceiling -- It's the Dollar


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American Spectator:

Today, the chorus line of the debt ceiling and dollar bears is "all fall down." The missing issue of this President election is monetary policy -- America's need for a stable dollar. But massive Federal Reserve credit expansion, QE1 and QE2, has forced the volatile dollar down to such a depreciated level on the foreign exchanges that, absent QE3, a reversal of trend should appear with rising interest rates by the upcoming Presidential election.

Even more confusion pervades the public controversy over the future of the world dollar standard and its alternative -- the true gold standard. The international debate focuses on the longevity of the dollar as the world's official reserve currency. The debate stems from two, recent, contradictory events. On the one hand, an unstable dollar, caused by the Federal Reserve credit contraction of 2005-2007, led to the deflation of 2007-2009. On the other hand, the steady rise of the gold price -- also caused by the subsequent Fed expansion of QE1 and QE2 -- has signaled the threat of inflation.

The painful economic consequences of alternating deflation and inflation have refocused the historic American monetary debate. Americans must choose between paper money and gold. The choice will be either: (1) floating paper currencies mixed with pegged exchange rates for key currencies -- such as a fixed link between the paper dollar and the paper Euro; or (2) on the other hand, a non-national, neutral American monetary standard such as gold, i.e. a dollar defined in statute by a stable, fixed weight of gold.

To choose the gold standard and a stable dollar entails an American self-denying ordinance by which to reject the privilege and the burden of the official reserve currency role of the dollar. To choose floating paper currencies with a pegged dollar-Euro exchange means continued systemic inflation and deflation, caused by unconstrained Federal Reserve and foreign central bank manipulation of the official dollar reserve system. snip
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