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Originally posted on RealMoney at 10:01 a.m. EST.

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I am tired of reading that the dollar's decline is a function of our interest rates and their need to decline further on the short end.

The dollar is a referendum on how badly President Bush, Treasury Secretary Paulson and Princeton Professor Ben Bernanke are handling the housing crisis and the economy. The dollar is a repudiation of their lack of creativity, their inability to recognize that the monoline problem plus the housing losses have eliminated the excess capital the banks have to lend, and their insistence that laissez-faire works when it comes to broken markets.

The dollar's decline is a statement that Ben Bernanke will not do what he said he would do in 1992, which is have the


buy the bad collateral that the banks are stuck with.

The dollar's plummet is a statement that the government would rather give out $600 to those who need it than take stakes in the companies that could have built the capital reserves, the



, the


(MBI) - Get Free Report

, the




The endless slide has to do with the recognition that the markets are beyond the grasp of the president himself or the Democrats who think the answer is punishing the banks with bank holidays.

The government has to get involved to solve this problem. Without getting the FHA engaged, it makes too much sense to walk away from your home.

The government seems unable to recognize that the issue here is simply the need to get houses to stop depreciating.

Lots of people when I write that say that I favor bailouts, that I favor higher home prices, which are bad, that I want deadbeats helped.

I have to tell you: If you have stuck it out this long in your house, you are not a deadbeat. You are doing everything you can to stay in your home, despite articles that say otherwise. Walking away from a home is a horrible decision, predicated at this point on the need to feed your family. I don't care that the borrowers should have been smarter or the lenders less rapacious. I want to see the glut of homes shrunk and the desire to buy a home not be a fool's game, as it is now.

Without some engagement by the government, the dollar will continue to fall.

Don't forget, our inflation is mandated by the futile attempts to get ethanol jumpstarted while we put tariffs on sugar and we keep cheap Brazilian ethanol out.

The whole debacle is much more important than the reasons you hear about the decline in the dollar.

Do not forget that if we solved the housing crisis, we could then raise the rates and bring money in. The way to solve it is to give the banks more money to lend -- they don't have it. That's what the



mortgage issue was about. That's what the hedge fund margin calls are about. The banks can't lend because they don't have enough capital.

They are trying furiously to


their balance sheets so they cannot run afoul of capital requirements, which, because of all the bad loans, they are in danger of doing. By cutting the short rates to well below the two-year mark, you allow the banks to take your deposits, invest in the "curve," make money every day and rebuild capital. You also allow hardship borrowers to refinance from the FHA.

It's the



And it is not happening.

At the time of publication, Cramer had no positions in the stocks mentioned.

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