Paul Krugman writes in his oped column The Spanish Prisoner,

So Spain is in effect a prisoner of the euro, leaving it with no good options.

The good news about America is that we aren’t in that kind of trap: we still have our own currency, with all the flexibility that implies. By the way, so does Britain, whose deficits and debt are comparable to Spain’s, but which investors don’t see as a default risk.

The bad news about America is that a powerful political faction is trying to shackle the Federal Reserve, in effect removing the one big advantage we have over the suffering Spaniards. Republican attacks on the Fed — demands that it stop trying to promote economic recovery and focus instead on keeping the dollar strong and fighting the imaginary risks of inflation — amount to a demand that we voluntarily put ourselves in the Spanish prison.

It has always been my contention that the way the U.S. will adjust to the fact that countries like India and China can do all the jobs that Americans can do and for much lower wages, that our wage rates will come into line with those of India and China.  Either our wages will decline in dollar terms or the dollar will decline.  As Krugman says, I think the decline of the dollar will be the less painful way to accomplish the adjustment. (Of course Indian and Chinese wages will rise some to ease our pain a little.)

If we go the route of lowering wages in dollar terms, the wealth of the rich will be preserved.  Their wages will also be preserved because the wealthy don’t get wage cuts.  If we let the value of the dollar decline, then everyone in the country gets to take the ride together.  Now you know why the Republicans are so dead set against letting the value of the dollar decline.