In the WSJ Op-ed section today, David Malpass seems to be having a hard time figuring out why the Greenback is in trouble.
He’s our Quote of the Day:
"Dollar weakness is neutralizing the positive effects of the Federal Reserve’s interest-rate cuts."
As the dollar spirals downward, weakened by Washington’s indifference and market expectations of more rate cuts, liquidity drains from the U.S. into inflation hedges like gold and, in the case of entrepreneurship and risk-taking capital, to countries with strengthening currencies. This drain undercuts the growth impact of the Fed’s recent rate cuts, complicating the recovery from the August credit-market turbulence. Question: What’s harder to sell than a complex loan during a credit crunch? A dollar-denominated one."
No, no, no, no, no!
Its not the that Fed cuts are being neutalized by the weak dollar — its the Fed cuts are CAUSING THE WEAK DOLLLAR.
(Yes, I am getting shrill)
Lifelines for the Drowning Dollar
WSJ, November 9, 2007; Page A19