Ramblings on The Economy

With the Michigan primary taking place today, it is interesting to me that the new catch phrase seems to be the same one that helped Bill Clinton win the Presidency: "It's the economy, stupid."

So I'd like to ask the question; why is it now the economy?

1. First of all, the stock market, a reflection of the productivity of workers, has basically gone nowhere since 2000.

2. Oil prices have skyrocketed in that same period of time from under $30 per barrel to nearly $100 per barrel.

3. Gold has skyrocketed from under $400 an ounce to over $900 an ounce.

4. Real Estate prices have skyrocketed at similar percentages as Oil and Gold.

5. The value of the dollar has dropped dramatically versus foreign currencies.

It appears that a weak dollar policy, to offset our large trade deficit, coupled with the war on terror, has caused dramatic increases in hard asset valuations.

Would not a more conventional interest rate curve, based on long-term investment returns, strengthen corporations and individuals, such that government would not need to bail out those who get punished from the volatility?

In other words, why not target the fed funds rate at about 3.5% and 10 year bonds at 5.5%, adjusting obviously as economic disruptions require it? This should complement a policy of inflation being between 1 and 2 percent and allow for a stronger dollar policy, which should help stabilize asset valuations.