Wednesday, November 3, 2010

Is Quantitative Easing Policy To Eliminate Or Devalue The Dollar?

 As the Federal Reserve Board gets ready for yet another round of quantitative easing (i.e. printing more money), one may well ask: Why? If previous quantitative easing hasn’t spurred domestic spending, why does the Fed believe that more of the same will suddenly produce results?
It’s not domestic spending that the Fed really hopes to stimulate by printing more money, but, rather, exports. While the Fed’s zero-interest rate policy has yet to lever much in the way of a domestic spending rebound, no one can doubt its ability to drop the value of its currency.  

 With the U.S. Treasury depleted and interest rates already at zero, that’s about all that’s left in the policy tool kit. Lurking behind the Fed’s official concerns for deflation lies its real agenda—the old standby, the “beggar thy neighbor” policy of trying to export your unemployment to your trading partners via a falling currency.
And no one can say it isn’t working. The greenback has already fallen to a 15-year low against the yen. It’s down over 20 per cent against the euro, while the junior dollars of Canada and Australia have rallied to within parity. 
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  1. The problem for the Fed is that other countries will probably raise tariffs to US imports, devalue their own money, and raise taxes on US dollars coming into their country. And many are alreday doing these things now.

  2. Its all by design folks....

    Now go back to sleep and don't worry about such trivial things like devaluing the dollar, surely there's a good football game on tv for you to watch.

  3. We here in the land of the luxurious and entitled get fairly paranoid when any of this changes for us and things start to go a little squeaky. Ask yourselves: how many times have currencies changed in the past, devauled, hyperinflated, changed into new forms, and then the country kept on trucking? Its the nature of capitalism to go through disasters. We run a disaster economy. Katrina and the Gulf Oil Spill are just two examples of what we produce at home. Other examples include Iraq, Afghanistan, Pakistan, Vietnam, Haiti, Guatemala, and so on.

  4. All examples of foreign export disasters. But the fact remains, and what I was alluding to is, that there have been many countries that have historically changed their currencies, from those in Europe, to South America, to Asia. It is humorous to see when it happens to us it must be a huge conspiracy created by aliens.

    Well, it might even be intentional, I wont rule that out. But at least understand the reality that it is not unheard of and in fact natural as to the design of our governments and economies.

  5. 12:54 at some point in nature, things collapse, end, fall, die, reset or fail... 100%, all of the time! Unless you're a cockroach.

  6. That is exactly right. We are all on the track towards death and nothing lasts forever. Our "walk in the park" and "smelling the sweet roses" of easy oil and easy money was bound to end as well. Some people who are not able to see the forest for the trees need an easy scapegoat to blame - a person in the shadows to aim their anger at when middle class, apathetic, selfish America goes to hell in a hand basket. While real causes continue to elude them, they will blame democrats, socialists, and karl marx. The liberals will blame idiotic republicans and their inadequate brains (partly true), both crowds still giving lip service to their own cute little cults theyve so familiarized themselves with. None of it will matter one iota as to the final outcome, though they will have remained blind to the ways that the world could have changed and prepared or gone differently from its current path. So the road will be rockier, but the result will be the same: this modern age of luxury (for some) ending with a whimper or a bang.

  7. QE2 is to prevent US treasury bond prices from collapsing. The federal gov't needs a source of cheap money to keep washington's doors open.


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