Monetary Sunset

Don't blame the "furriners" for this.  Really and truly, can you blame foreign central banks for not wanting to get stuck with warehouses full of Red Barry's wasterpaper (via Instapundit):

Central banks flush with record reserves are increasingly snubbing dollars in favor of euros and yen, further pressuring the greenback after its biggest two-quarter rout in almost two decades.

Policy makers boosted foreign currency holdings by $413 billion last quarter, the most since at least 2003, to $7.3 trillion, according to data compiled by Bloomberg. Nations reporting currency breakdowns put 63% of the new cash into euros and yen in April, May and June, the latest Barclays Capital data show. That’s the highest percentage in any quarter with more than an $80 billion increase.

World leaders are acting on threats to dump the dollar while the Obama administration shows a willingness to tolerate a weaker currency in an effort to boost exports and the economy as long as it doesn’t drive away the nation’s creditors. The diversification signals that the currency won’t rebound anytime soon after losing 10.3% on a trade-weighted basis the past six months, the biggest drop since 1991.

Note the highlighted passage.  What happens when the government pursues a deliberate policy of runaway debt and puts the Fed's printing presses on maximum overdrive to paper it over?  Ensign Ed tells the grievous tale:

The weaker dollar will make the sale of Treasuries that much more expensive, which should warn the US government away from further deficit spending.  The biggest problem afflicting the dollar, Bloomberg reports, is that there is just too much of it on the market, thanks to the increased need to cover deficit spending and the monetary policy that accompanies that need.

Thus we get the worst of both worlds.  Because of B.O.'s relentless march towards growth/prosperity-hostile domestic Marxism, the only protection we have against the collapse of what's left of the economy is this runaway currency devaluation; yet the only protection we have against a raging, Weimar-style hyperinflation is the continued deflationary depression.  Any bona fide "green shoots" will send wages, prices, and interest rates into outer space.  Yet this dollar dumping heralds precisely the creditor-flight that will bring all the remaining economic walls a-tumblin' down, since the Obamunists will NEVER acknowledge reality and NEVER deviate from the hard-left policy cancers that are killing our economy to death.

It's economic insanity, but political brilliance in the long term.  James Pethokoukis writes of "a devalued currency hasn’t exactly been a proven path to prosperity. (Ask Jimmy Carter)," and Larry Kudlow cracks that it "smells like the 1970s," and in the near term that will, indeed, be very bad for the Democrats in 2010 and Barack Obama in 2012.  But remember something about the stagflationary mess Ronald Reagan was left to clean up, and how he and Paul Volcker (the Fed Chairman at the time) had to do it: a double-dip recession in order to sop up all the excess dollars that LBJ, Nixon, Ford, and Carter had injected into the economy, AND the largest pro-growth income tax rate cuts in twenty years.  Picture what Democrats, even more radicalized and conscienceless after their 2010 and 2012 beatings, would do with the medicine necessary to cure the disease with which they infected us.  Then picture how receptive our largely clueless, gnat's-attention-span electorate would be to an even more massive, libelous, Enemy Media-trumpeted demagoguery tsunami when the restored Republicans didn't just push a magic button and make it "morning in America" overnight.

Heck, one of the central purposes for The One's debt blitzkrieg is to make supply-side economics politically impossible, thereby making the Carter-era "malaise" not just permanent, but a fond memory compared to the depths of poverty, pestilence, and despair to which he dreams of bludgeoning us.

There just isn't room for two kings in Obamerika.  So "King Dollar" has to go.

And it looks like he's already gone.