Per Friedman, inflation is "always and everywhere a monetary phenomenon." Congress' macro act was the 2003 marginal tax rate cuts, allowing the economy to grow faster by keeping more of its earned capital. The Fed always holds the key to stable money by draining liquidity to prevent the dollar from losing value. But the Fed has to act rationally, which it fails to do repeatedly.
I suspect you ignore the actual flexibility of the value of the dollar. Real GDP versus nominal GDP tends to show that variance. Are you arguing for a "board" with no rules, then?
You appear to admire the dollar's "flexibility" in changing value. I do not, because every change in the dollar's value burdens individuals and businesses with the task of adjusting prices and wages to maintain value. This is a great drag on economic growth. I am not arguing for a Fed with no rules. To the contrary, a money rule ought to be imposed on the Fed if it will not adopt one (presently the Fed uses what amounts to intuition to determine when it feels like the funds rate target has reached its "natural" level). The money rule ought to require the FOMC to drain liquidity by selling its Treasury securities until the gold price reaches $400/oz, and then add or drain liquidity as necessary to keep it there on a continuing basis.
If you've gotten that impression [that the Fed is intentionally weakening the dollar as a "temporary inflation measure"], it's wrong. The Fed is not "intentionally weaking the dollar for the sole purpose as a hedge against "temporary inflation".
Here is what you stated in a previous post: "Fed Chairman Bernanke made clear months back that this move FOR US exports would be occurring. For this to "occur", the dollar must drop, making our produced goods more attractive to the buyer." Are you saying the dollar "must drop" unintentionally?
This [higher funds rate targets are weakening the dollar and causing more inflation] is, in fact, a true assessment. But will it result in the horrid inflation of the 60s? Not necessarily. Long term, these actions are strengthening the dollar in real terms across all market sectors. Which ultimately results in the dollar buying more rather than less.
Respectfully, weakening the dollar as we have done since 1971 (the dollar is now worth a little more than five cents of the 1970 dollar) is not a recipe for strengthening the dollar over the long term. Particularly this is so when the Fed really does not understand the consequences of its actions.
I think I'll stop in responding to your previous post at this point and see whether this has been helpful. Thank you for commenting.
You are talking about menu costs. The value of the dollar does NOT vary to the degree which leads you to bring up menu costs, and hopefully you really DO know this.
Here is what you stated in a previous post: "Fed Chairman Bernanke made clear months back that this move FOR US exports would be occurring. For this to "occur", the dollar must drop, making our produced goods more attractive to the buyer." Are you saying the dollar "must drop" unintentionally?
Intention or unintentional -- is irrelevant to what the market bears and the purchasing mentality of buyers.