London Times on America's Feeble Dollar

The London Times has an excellent article on Obama's weak dollar strategy. The article notes:

"All of this means that investors do not believe that President Barack Obama will respond to the enormous pressure put on him during his visit to Beijing and take steps to strengthen the dollar. The president and Treasury secretary Timothy Geithner might talk the talk of a strong dollar but they walk the walk of a declining one. A weak dollar should lift exports and cut imports, which in White House terms means jobs for American workers. And it is jobs that the president asks his aides about first thing every morning. With reason."

The article notes that there are risks associated with gold investing, in particular the chance that the Fed will attack inflation. The article inaccurately attributes the Volcker Fed policy to Reagan. Carter appointed Volcker and he instituted his monetarist strategy during the Carter administration. Reagan allowed him to continue. But Volcker reinstated inflation in the early 1980s and the Reagan administration was for it. They called it "supply side economics".

A likely scenario is that Obama and Bernanke will resist limiting monetary expansion until a strong inflation is underway. There will be plenty of time to exit gold when they do exit. Even if they do exit, the credibility of the dollar has been permanently reduced. I'm not sure that even if the Fed strengthens the world will take the dollar seriously in the future.