Something must be done to reverse this, and John McCain is the man to do it. Remember, McCain was a foot soldier in the Reagan revolution. Borrowing a page from the Gipper — who always said a great nation has a strong currency — he should argue on the campaign trail for a dollar surge. He should insist that a President McCain will order the Treasury Department to initiate open-market actions to boost the greenback. He should say his Treasury will conduct dollar-strengthening diplomacy with Europe, Britain, Canada, and Japan. He should state that a President McCain will appoint a Federal Reserve chief who will stop ignoring the dollar and inflation, as Fed Head Ben Bernanke did last week before Congress.
Treasury can intervene all they want and it won't have any impact at all if the Fed keeps cutting rates. McCain can argue for a dollar surge until he is blue in the face and it won't change anything if we keep running monetary policy like we are now. Kudlow says McCain should appoint a new Fed chief, but if the new guy isn't Paul Volcker it won't make any difference. Is Kudlow willing to see McCain preside over a deep recession if he finds a Fed chief willing to be the next Volcker? I don't think so.