Will the US$ be an FOMC topic of discussion?
As the FOMC begins their two day meeting today not only will they have to juggle the current stabilization in the US economy with their extremely accommodative policies, I wonder whether they will discuss the US$ and the price of gold as price stability (stable currency) is one of their two mandates. The $ index is falling to a fresh 13 month low today and gold is just shy of a new high. Based on the stock market action in response, we are depreciating our way to prosperity and the reflation trade is the best defense. Since Bernanke took office on Feb 1st 2006, the $ index is down 15% and gold is up 79%. With the Fed mostly focused on the temporary changes in prices as measured by the CPI and PCE deflator and also the output gap, it’s likely they won’t express much concern as from that perspective, prices still remain subdued. The Asian Development Bank increased its Asian region economic growth estimate for ‘09.
September 22nd, 2009 at 10:54 am
You have to think that exporting countries are not happy with DGDF. We can’t depreciate for ever.
September 22nd, 2009 at 1:16 pm
What can they do? They really have no choice but to inflate to prevent debt deflation and economic collapse… We will be lucky to get away with a couple years of stagflation – I suspect it will be much worse given the ever-expanding fiscal deficits, unfunded liabilities and the inability/unwillingness to raise taxes…
September 22nd, 2009 at 4:18 pm
Absolutely. But talk is cheap and so is the USD.
September 23rd, 2009 at 11:09 am
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