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NEW YORK (TheStreet) -- For the first time in a decade, the United States is a strong currency country. The dollar has risen to its highest level since the early 2000s and policymakers should consider propping it up further to help America transition to a strong currency economy, which, long-term, will be highly beneficial. 

A nation with a strong currency needs to have a strong economy with productive and competitive businesses. Such an economy needs an educated, mobile work force, one that is constantly learning and growing. An economy like this is rich with information and promotes the spread of information so science and technology can thrive. 

A strong currency economy needs lots of innovative behavior, the behavior described by economist Joseph Schumpeter as creative destruction. 

The companies in such an economy create organizations that can achieve and sustain a competitive advantage and that are financially disciplined. These companies face almost continuous threats from innovative efforts coming from either similar striving companies or from entrepreneurs possessing new ideas.

Should the dollar, growing stronger now, continue to stay strong, this is the kind of economy that will grow around the invigorated currency. 

The United States has not exactly been this kind of nation over the past fifty-five years. Since the end of the second World War, the dollar has been the only reserve currency in the world and this has given the United States special privileges.

For one, the United States has been able to follow a "weak currency" economic policy since the early 1960s. Fundamentally, this has been a policy of credit inflation where credit has expanded almost continuously at an exponential rate. This credit inflation has been underwritten and encouraged by the deficits of the federal government and the supportive interest rate policies of the Federal Reserve System.

This era of credit inflation was kicked-off in the early 1960s with a Keynesian-inspired tax cut and a deceptive and dishonest president that fought a war in Vietnam without properly financing the effort (Lyndon Johnson). This was followed by another deceptive and dishonest president that claimed "we are all Keynesians now" as he sought to stimulate the U.S. economy to get himself re-elected to the White House (Richard Nixon).

These actions resulted in 1971 in the breakup of the post-World War II international monetary system, the Bretton Woods System, and the floating of the value of the dollar.

Since the dollar was floated, it's value has trended downward as subsequent presidential administrations, both Republican and Democratic, pursued policies of credit inflation. The dollar's value has declined by 37.2 percent from January 2, 1973 to May 22, 2011. (The series used is the Federal Reserve's Trade Weighted U.S. Dollar Index of Major Currencies.)

If the dollar had not maintained its reserve currency status, it is doubtful that the U.S. would have been able to get away with such policies over such an extended period of time. In such a weak currency reign, the economy took on many characteristics opposite that of an economy with a strong currency. But, the credit inflation that resulted in this weak currency economy also undercut the financial discipline of corporations and financial institutions.

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In this environment, companies believed that they could take on more and more risk. Credit inflation also helped to pump-up corporate returns through financial leverage and encouraged financial innovation, which ended up producing a more fragile system.

The United States did not seek to be a strong-currency country. The country currently just finds itself in that position because it is less worse off that most other countries. But, this does not mean that the United States is ready to be a strong currency nation.

If the United States continues to follow a path of Keynesian credit inflation, it may, for a short time, remain one of the stronger currencies in the world. However, it will not be able to sustain this position without a change in attitude among governmental leaders, business executives, and members of the workforce.

In fact, Congress might seek legislation to protect American businesses. Paul Volcker, former chairman of the Federal Reserve, has written that for a brief period in the 1980s, after the Fed had tightened monetary policy and achieved a substantial rise in the value of the dollar, Congress aggressively called for more protectionism.

If Congress erected trade barriers it would just allow the government to continue on pumping the economy full of credit and America would be right back where it was, back to being a "weak" nation economically, relying on credit inflation to keep the economy going and keep workers employed in their old jobs.

This is what Keynes attempted to do in the 1920s and 1930s. World War I had shown that Great Britain and the British Empire were beyond their peaks. England's productive capacity could not compete with that of the United States. Keynes was combating two things: first, how to keep England great; and, second, how to prevent a Bolshevik revolution from disrupting his world.

His goal was to protect his class of people and, to do this, he proposed that England adopt fixed exchange rates while it severely restrict the free flow of capital internationally. This would allow England to conduct an economic policy, primarily composed of deficit spending, which would protect England from what was happening in other economies and would keep people as fully employed as possible. It would, at the same time, prevent a revolution that would upset polite English society. He further favored protective tariffs to shelter business.

Unlike this description of England, the United States has passed its peak as a productive, competitive economy. Capital will continue to flow freely throughout global financial markets and that nations will continue to support freely floating exchange rates.

When it comes to policy, however, the United States government must operate in a disciplined fiscal manner keeping the value of the dollar stable over time as a strong currency.

This would provide American business leaders and American innovators the incentives they need to produce the premier productive and competitive economy of the world. 

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.