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Fed Ease Means Dollar Strength
NRO Financial ^
| August 24, 2007
| John Tamny & Paul Hoffmeister
Posted on 08/24/2007 3:56:39 PM PDT by Toddsterpatriot
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To: 1rudeboy; Mase; expat_panama; Rusty0604; Jim 0216; xjcsa; VegasCowboy; Moonman62; Southack; ...
2
posted on
08/24/2007 3:57:05 PM PDT
by
Toddsterpatriot
(Ignorance of the laws of economics is no excuse.)
To: Toddsterpatriot
Cutting spending to fit what we actually have coming in does wonders, as well.
But what fun is that? PRINT MORE MONEY!!
3
posted on
08/24/2007 3:58:39 PM PDT
by
mysterio
To: Toddsterpatriot
Best part of this whole situation so far was watching Bernanke crack the bears in the kneecaps last Friday.
4
posted on
08/24/2007 3:59:58 PM PDT
by
Petronski
(Why would Romney lie about Ronald Reagan's record?)
To: mysterio
Not entirely sure how cutting government spending would solve the sub-prime bubble.
5
posted on
08/24/2007 4:00:57 PM PDT
by
1rudeboy
To: Toddsterpatriot
People scoff and think M1 and M2 are outdated but they’ve been off the charts for years. Now that the demand for the dollar is low, that may produce a higher dollar relative to the Euro. However that won’t last long. The dollar is still going down. Down, down, down until the ChiComs agree to a reevaluation!
6
posted on
08/24/2007 4:00:59 PM PDT
by
Incorrigible
(If I lead, follow me; If I pause, push me; If I retreat, kill me.)
To: Toddsterpatriot
That would explain how the $US was at 1.34 against the $EU and is now, after the rate cut, 1.36.
7
posted on
08/24/2007 4:01:39 PM PDT
by
RightWhale
(It's Brecht's donkey, not mine)
To: Toddsterpatriot
Targeting higher interest rates to combat inflation is very much a Keynesian concept whereby central banks seek to reduce economic activity as well as prices. Contrary to current Fed objectives, the surest way to decrease dollar demand and ultimately cause a net excess of dollar liquidity that would spark new inflationary pressures would be to target the economy for slower growth with higher interest rates. Sounds familiar to me.
8
posted on
08/24/2007 4:01:51 PM PDT
by
Moonman62
(The issue of whether cheap labor makes America great should have been settled by the Civil War.)
To: Hydroshock
Ping to the ding-a-ling:
Overall, lower gold prices, a stronger dollar against the euro, lower long-term bond yields, and rising equity valuations are indisputable hallmarks of a disinflationary environment not a resurgence of inflation.
9
posted on
08/24/2007 4:05:13 PM PDT
by
Moonman62
(The issue of whether cheap labor makes America great should have been settled by the Civil War.)
To: Toddsterpatriot
Lets see if I have learned anything
So, low dollar, high dollar, who cares? The US economy is so strong it will pull the dollar up if it goes to far down and down if it goes to far up? Hang on and enjoy the ride.
10
posted on
08/24/2007 4:13:58 PM PDT
by
winodog
( Coming Attractions: Bubba II Worse Then The First)
To: Moonman62
And you believe those trends will continue if the fed eases on the funds rate?
11
posted on
08/24/2007 4:16:30 PM PDT
by
Mariner
To: Toddsterpatriot
The dollar is currently close to 30 year lows compared to a basket of foreign currencies. It has lost 30% against the Euro the last five years.
And lowering rates will make this equation more favorable?
To: Mariner
I believe that if the Fed lowers rates to be in more of a logical relationship to other rates in the yield curve, that would be neutral or in fact be disinflationary. The problem is when the Fed waits too long to lower rate (as it always does), then it has to lower rates too much, which is inflationary.
The Fed creates inflation at both extremes of the credit cycle. It creates too much money when rates are too low, and it does economic damage when rates are too high. Both results are inflationary.
13
posted on
08/24/2007 4:22:11 PM PDT
by
Moonman62
(The issue of whether cheap labor makes America great should have been settled by the Civil War.)
To: Toddsterpatriot
“When the Fed reversed course in 1975, lowering its rate target from 13 to 4.75 percent, gold actually fell 23 percent. When the Fed raised the funds rate all the way to 14 percent in 1980, rather than strengthen, the dollar fell, driving the price of gold from $150 an ounce to an all-time-high of $892.”
I wonder about causation. Did the value of Gold change in reaction to the Fed’s moves or did the Fed change to stop dollar problems which then showed up in the price of gold?
I’ve been trying to get a handle on the value of gold versus the dollar and its abilty to predict general economic trends. First I think gold and oil are poor commodities to use since they raise and fall on other than just pure economic news. Maybe lead? I don’t know. Anyway I did some quick and dirty analysis and found gold and oil and lead seem to be closely tied.
Just an amateur economist with lots to learn.
To: winodog
The economy is strong because we are selling tons of stuff abroad.
Weak $$$ : strong exports :strong economy : full employment
15
posted on
08/24/2007 4:26:01 PM PDT
by
bert
(K.E. N.P. +12 . Hillary's color is yellow.....how appropriate)
To: live+let_live
The economic facts of the 1970’s should shoot down the widely held belief that economic growth and employment growth cause inflation. Instead, the word “stagflation” was invented and everybody maintained business as usual.
16
posted on
08/24/2007 4:26:50 PM PDT
by
Moonman62
(The issue of whether cheap labor makes America great should have been settled by the Civil War.)
To: RightWhale
17
posted on
08/24/2007 4:26:51 PM PDT
by
spanalot
To: Toddsterpatriot
Cut the rate when necessary. If we’re going to keep the big import industry going for a little while, the dollar must fall to equalize with foreign currencies. And eventually, America will have to get back to real work (more manufacturing).
18
posted on
08/24/2007 4:27:40 PM PDT
by
familyop
To: RightWhale; Tripleplay
That would explain how the $US was at 1.34 against the $EU and is now, after the rate cut, 1.36.Where was the $US when the Fed Funds rate was 1%?
Gold hovered in the high $300s while Greenspan held the fed funds rate at 1 percent between July of 2003 and June of 2004.
![](http://ichart.finance.yahoo.com/5y?eurusd=x)
Hmmmmmmmmmm.
19
posted on
08/24/2007 4:42:55 PM PDT
by
Toddsterpatriot
(Ignorance of the laws of economics is no excuse.)
To: Moonman62
It creates too much money when rates are too low, and it does economic damage when rates are too high. Both results are inflationary.Don't tell the goldbugs or other financial illiterates.
20
posted on
08/24/2007 4:46:05 PM PDT
by
Toddsterpatriot
(Ignorance of the laws of economics is no excuse.)
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