"A Strong Dollar is in the America's National Interest" has been a statement uttered by presidents, Treasury secretaries and Federal Reserve heads for decades. It has transcended party politics and liberal and conservative ideology. The dollar, as measured by the dollar index of trade weighted currencies, has fluctuated over the last 25 years, going roughly as low as 70 and as high as 120.

I would argue that the spikes of 1999 - 2000, 2007 - 2008, and of 2015 were and are aberrations and that the value of the dollar has for the most part traded in the 80 to 95 area. The spike in 1999 was due mainly to the Y2K scare. The huge drop in 2007 and 2008 was due to the financial crisis and subsequent recession. And the spike today is due to the major nations of the world intentionally devaluing their currencies in an attempt to stimulate their economies. But generally speaking, anything above 100 and under 75 have been temporary aberrations.

So a strong dollar in today's context means a stable dollar trading within its recent historic norms. Domestically, over the last 25 years, prices have gone up but at a slower rate. We have seen the rate of inflation fall from 14% in 1980 to less than 1% recently. Prior to 1980, the Federal Reserve Board was erratic and many times destructive in implementing monetary policy. There is ample evidence that the Fed was responsible for the roaring 20's, the deflationary 30's and the inflationary 70's.

But since Paul Volcker, and under the stewardship of Alan Greenspan and Ben Bernanke, monetary policy has become much more consistent and constructive. I'm aware of the school of thought that these men caused all the evils of the last 25 years, but I'm also acutely aware of the lack of evidence to back those allegations up. The years between 1982 and 2007 were a quarter-century of unprecedented prosperity, where the average person in America saw innovations and wealth created as never before. Employment soared, and standards of living increased across the board.

As inflation declined and tax rates were held low, we saw only three quarters of negative growth -- unprecedented in a 25-year period! Unemployment fell to historic lows and we redefined what full employment really was. And the term "poor" disappeared for the most part from the English language during that period. We witnessed a technological revolution that changed the lives of us all. For those that still believe that it was the Fed that caused the financial crisis, I offer the following article as an alternative view of what really happened...

Click here: The Real Cause of the Financial Crisis or...the Lesson of the Elephant in the Room - PaulNathan.biz

Through all of this incredible period of growth the dollar remained strong and stable except for short periods of spikes upward and downward. In these periods we saw disruptions that were counterproductive to growth and stability. We had to go through a period of readjustment, not always pleasant. I would argue that a strong dollar is a stable dollar.

I neither want to see a constantly increasing value of the dollar nor a constantly decreasing one. I want to see a market-oriented value of the dollar, made stable by sound monetary and fiscal policies. Those that argue against a strong dollar and want a lower dollar desire a competitive edge in trade for themselves or the economy. They fear that a strong dollar would lead to lower import prices and force companies' profits to fall, even causing some to go out of business, unable to compete.

These same folks hate a rising dollar since that makes US exports more expensive abroad and is bad for business. They are correct, but only to a degree. It is true only in the short term. And remember we are not all importers or exporters -- but we are all consumers. Lower prices benefit every American. That's why in the long term no country has ever been able to devalue their way to prosperity.

The US has had a strong dollar policy yet its employment rate over the last 25 years has beaten that of the eurozone who are notorious for devaluing their currencies to gain an unfair trade advantage, and "protect" their markets through trade barriers and tariffs. Yet over this period prosperity and employment stagnated. To pursue a strong dollar policy goes hand and hand with pursuing free and open trade. It also assumes the free flow of money between nations and the absence of capital controls.

Free and open trade policies are essential to maintaining a strong dollar but so are sound fiscal policies. As a nation's debt goes, so goes its currency. As the servicing of debt becomes more difficult it will begin to affect its currency. Japan is experiencing that phenomenon now. Parts of the eurozone are also at risk of monetary and fiscal disintegration. A stable currency with balanced budgets and open markets pave the way to prosperity. Sharply decreasing and increasing currencies are disruptive.

So a strong stable currency is the result of sound economic and monetary policies. The next obvious question is, then why is the dollar sound when we are pursuing an out-of-control national debt? And the answer is that it is because we can still service the debt at low interest rates. Another reason is that other nations are willing to loan the US money by buying our bonds and thus helping us service our debt. And still another is that we have been in disinflationary/recessionary times which lead to a demand for safety. All of these factors allow the US to finance debt at much lower than normal costs. But as the world returns to normal, we face a rude awakening. Higher interest rates will mean higher financing costs and either greater borrowing or greater taxation.

The dollar looks better than it is only when you measure it against other nations' currencies. When measured against gold, however, the dollar has fallen by 98% since the Federal Reserve took over monetary policy in 1913. Just since the year 2000, gold went from about $250 dollars an ounce to near $1200 today. So, gold's purchasing power beats the dollar's purchasing power many times over.

I agree that a strong dollar is in America's national interest, but we should never lose sight of the fact that a strong dollar policy must be supported by the underlying fundamentals that give rise to a strong currency, and those fundamentals have been deteriorating. Unfunded liabilities caused by run-away entitlements threaten to balloon the deficit to the point where we can no longer fund it. The national debt is headed for double what it was just six years ago. Any return to normal interest rates will cost taxpayers a lot more, and borrowing from others in the future will become problematic as all this begins to take its toll.

Our political leaders need to recognize that while the US is certainly doing better than most other countries in the world, we are doing a pathetic job compared to what we have done in the past and could and should be doing today. It's time to insure the future value of the dollar not just by slogans, but by attending to our present fiscal deterioration.

It is in America's national interest to do so.