Congress and the Dollar?

The following article was in this past weekend's Wall Street Journal. This might make for an interesting classroom discussion:


"We cannot stand idly by. . ." when stated by an elected official usually infers a future action. What role should Congress play in the value of the dollar?


"Republicans Seek Hearings on Dollar's Fall
By HENRY J. PULIZZI
May 3, 2008; Page A4

Top Republican lawmakers are calling for congressional hearings on the dollar's decline, including how the Federal Reserve's interest-rate cuts have pushed the greenback lower and commodity prices higher.

"We cannot stand idly by while the dollar's value continues to plummet, pushing up food and energy prices and lowering the American people's standard of living," the lawmakers said in a letter to House Speaker Nancy Pelosi (D., Calif.) and Senate Majority Leader Harry Reid (D., Nev.).

The letter, dated May 1, was signed by House Republican leader John Boehner of Ohio, Senate Republican leader Mitch McConnell of Kentucky, House Republican Whip Roy Blunt of Missouri and Senate Republican Whip Jon Kyl of Arizona. (Read the full test of the letter.)

The climb of oil and food prices has sparked a debate on Capitol Hill, with both Democrats and Republicans looking to address the strain on consumers. The hearings would focus on the dollar's role in fueling higher prices. This year, the dollar is down 5.3% against the euro and 5.4% versus the yen.

The U.S. currency contributes to rising energy prices because oil is priced in dollars. It also leads some investors to buy commodities to protect against the threat of inflation.

The GOP lawmakers said the hearings should focus on the impact of the Fed's rate cuts, the threat of potential tax increases on investment, the effect of trade policy on exports, and the potential for federal policies to discourage bringing new oil supplies online."