Telling It Like It Is To Bernanke

[Paulie]

Republican Presidential candidate Ron Paul, in various commitee meetings with Ben Bernanke:

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House Financial Services Q&A

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A different session, Part 1

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Part 2

There are many more, and if you care enough you can go and find them. I don't see Bernanke giving a straight answer at all.

I don't want this thread to turn into a Ron Paul hate thread. I reserve the right to have it deleted or closed if it does, because I'd like to have a serious discussion. It doesn't necessarily have to be about Ron Paul specifically, but I used his testimony to make a point. I'd also like to limit the discussion to members who have a better understanding of US economics.

 

[eots]

Republican Presidential candidate Ron Paul, in various commitee meetings with Ben Bernanke:

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House Financial Services Q&A

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A different session, Part 1

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Part 2

There are many more, and if you care enough you can go and find them. I don't see Bernanke giving a straight answer at all.

I don't want this thread to turn into a Ron Paul hate thread. I reserve the right to have it deleted or closed if it does, because I'd like to have a serious discussion. I'd also like to limit the discussion to members who have a better understanding of US economics.

he cant be ignored..unless he suffers the same fate as kennedy, over this next year he will become a front runner

 

[Foxfyre]

I think Ron Paul is wrong about the issue(s) he was addressing. Low interest rates helped many millions of Americans refinance their homes and/or move into better ones and that, plus more favorable tax policies, stimulated the economy that has increased wages and personal wealth. The 'housing bubble' fiasco occurred mostly through unwise speculative investments and ignorance of home owners signing the loans. The fix comes through application of fair trade practices which would require lenders to provide full disclosure as to the risks of ARMs and what they should expect from them. People who did not take the ARMs and took fixed rates benefitted enormously.

As for the low dollar, there are many informed opinions who do not see that as a negative thing despite the angst of the Europeans and Japanese who view it as disastrous:

May 30, 2003 | EPI Briefing Paper #138

The benefits of a lower dollar
How the high dollar has hurt U.S. manufacturing producers and why the dollar still needs to fall further

by Robert A. Blecker

The current decline in the dollar will provide a much-needed stimulus to the U.S. economy. The falling dollar will bring especially welcome relief to the internationally competitive U.S. manufacturing sector, which has suffered disastrous consequenceslost jobs, reduced profits, and decreased investmentas a result of the dollar's overvaluation for the past several years. However, although the dollar has come down significantly from its peak in February 2002, it has not yet fallen nearly enough to reverse the damage caused by its high value since the late 1990s.

In spite of its recent fall, the dollar has still not lost most of the value it has gained since 1995 compared to the euro and other major currencies. Moreover, the dollar has not fallen compared to the currencies of the developing nations that now account for more than half of the U.S. trade deficit. Some of these nations, especially China, maintain fixed exchange rates and intervene heavily to prevent the type of market-driven adjustment that is now occurring between the dollar and the euro. As a result, relying on financial markets to bring the dollar down is not enough. More active management of the dollar's declineincluding cooperation with major U.S. trading partners and action to end foreign manipulation of currency valuesis vital to ensure that the dollar falls in a comprehensive and sustainable fashion.

The high value of the dollar since the late 1990s has acted like a massive tax on U.S. exports and a huge subsidy to U.S. imports. As a result, although U.S. manufacturing firms have made substantial investments in new technologies and U.S. manufacturing workers have vastly increased their productivity, these achievements have not paid off in the face of foreign products that have been selling at deep, artificial discounts created by the overvalued dollar. Specifically, the overvalued dollar has resulted in:

About 740,000 lost jobs in the manufacturing sector by 2002&#8212;more than one-quarter of the 2.6 million jobs lost in manufacturing since 1998.

A decrease of nearly $100 billion in the annual profits of U.S. manufacturing companies by 2002.

A fall in investment in the domestic manufacturing sector by over $40 billion annually as of 2002, representing a loss of 25&#37; of U.S. manufacturing investment.

more here. . . .
http://www.epinet.org/content.cfm/briefingpapers_may03bp_lowerdollar

 

[Paulie]

I think Ron Paul is wrong about the issue(s) he was addressing. Low interest rates helped many millions of Americans refinance their homes and/or move into better ones and that, plus more favorable tax policies, stimulated the economy that has increased wages and personal wealth. The 'housing bubble' fiasco occurred mostly through unwise speculative investments and ignorance of home owners signing the loans. The fix comes through application of fair trade practices which would require lenders to provide full disclosure as to the risks of ARMs and what they should expect from them. People who did not take the ARMs and took fixed rates benefitted enormously.

Low interest rates were the fault of the Fed. The only way you can balance out the monetary system after cutting rates is by inflating the monetary supply by printing more paper notes. Americans at large can't be blamed for wanting to own homes, and signing mortgages while rates were low. Who WOULDN'T? If you could afford that payment at the time, you signed the mortgage. Owning a home and creating an asset for yourself is something that should never be discouraged. I'll agree with you on the ARM issue, as it's ridiculous to let the bank adjust your rates...how can anyone really be certain what the Fed will do in the future to affect a bank's decision to adjust rates accordingly.

The main reason why people can't make due on their mortgages NOW, whether ARM or not, is that their dollar is losing it's value. The Fed cut those rates down to near 0, and had to balance it by printing more money, thereby devaluing the dollar. It has caused prices to soar, which has left the middle class homeowner in a situation where they just can't afford that mortgage payment anymore.

Americans are insatiable spenders, that much is certain, but the current housing bubble crisis is no different than any other inflationary bubble throughout history. Empires of the past that utlized this type of monetary policy have always collapsed from the same kinds of crises.

Consumer over-spending and ARM's ALONE can not be blamed for what is happening to our middle class and our economy right now.

As for the low dollar, there are many informed opinions who do not see that as a negative thing despite the angst of the Europeans and Japanese who view it as disastrous:

The only people who could POSSIBLY think a declining dollar is positive, are the one's who have so much, it would probably never affect them.

To say a declining dollar is positive, is insane, no matter what your economic education.

My son is 3 months old. When he was born back in August, a case of Similac formula was $25. Now, it's $30. In 3 months, the cost went up $5. That is the result of the value of the dollar decreasing. I'm not rich, that shit HURTS. And it's just one example of how little our dollar is buying nowadays. Sure, if I was a millionaire, I probably wouldn't need to worry. I'm an average middle class citizen in a dual income rented household, and each year it's becoming harder and harder to make ends meet.

The middle class is the backbone of this nation, but it's slowly becoming bankrupt. A nation can only fall under such circumstances.

 

[Toro]

he cant be ignored..unless he suffers the same fate as kennedy, over this next year he will become a front runner

No he won't.

I'll bet any amount - $100, $1,000 $10,000 - anything you want, that at no point, Paul will be leading the Republican candidates.

 

[Paulie]

No he won't.

I'll bet any amount - $100, $1,000 $10,000 - anything you want, that at no point, Paul will be leading the Republican candidates.

Please don't comment in this thread unless you're going to address the topic. That goes for everyone. I'd like to have a real discussion on this, and from what I've seen about you Toro, you should have more to contribute to a thread like this than a smeer of Ron Paul.

 

[Ninja]

Yeah, Toro. Only the Paulestinians are allowed to shit on other candidates' threads

 

[Toro]

That was a great monologue by Ron Paul. He is 100% right.

When he made that speech, the floor traders on the Chicago Mercantile Exchange cheered.

 

[Toro]

Please don't comment in this thread unless you're going to address the topic. That goes for everyone. I'd like to have a real discussion on this, and from what I've seen about you Toro, you should have more to contribute to a thread like this than a smeer of Ron Paul.

Eots said he will be the front runner, "unless he is shot." That's my way of saying, no way. It shouldn't be particularly difficult to understand that I wasn't smearing Ron Paul.

 

[Foxfyre]

Low interest rates were the fault of the Fed. The only way you can balance out the monetary system after cutting rates is by inflating the monetary supply by printing more paper notes. Americans at large can't be blamed for wanting to own homes, and signing mortgages while rates were low. Who WOULDN'T? If you could afford that payment at the time, you signed the mortgage. Owning a home and creating an asset for yourself is something that should never be discouraged. I'll agree with you on the ARM issue, as it's ridiculous to let the bank adjust your rates...how can anyone really be certain what the Fed will do in the future to affect a bank's decision to adjust rates accordingly.

The main reason why people can't make due on their mortgages NOW, whether ARM or not, is that their dollar is losing it's value. The Fed cut those rates down to near 0, and had to balance it by printing more money, thereby devaluing the dollar. It has caused prices to soar, which has left the middle class homeowner in a situation where they just can't afford that mortgage payment anymore.

Americans are insatiable spenders, that much is certain, but the current housing bubble crisis is no different than any other inflationary bubble throughout history. Empires of the past that utlized this type of monetary policy have always collapsed from the same kinds of crises.

Consumer over-spending and ARM's ALONE can not be blamed for what is happening to our middle class and our economy right now.



The only people who could POSSIBLY think a declining dollar is positive, are the one's who have so much, it would probably never affect them.

To say a declining dollar is positive, is insane, no matter what your economic education.

My son is 3 months old. When he was born back in August, a case of Similac formula was $25. Now, it's $30. In 3 months, the cost went up $5. That is the result of the value of the dollar decreasing. I'm not rich, that shit HURTS. And it's just one example of how little our dollar is buying nowadays. Sure, if I was a millionaire, I probably wouldn't need to worry. I'm an average middle class citizen in a dual income rented household, and each year it's becoming harder and harder to make ends meet.

The middle class is the backbone of this nation, but it's slowly becoming bankrupt. A nation can only fall under such circumstances.

The Fed lowers the interest rates ONLY when inflation is low and the economy is not excessively accelerating. They do NOT offset lowered interest rates by printing more money. I'm not sure where that screwy idea came from, but Ron Paul is as wrong about that as he is wrong about a weak dollar being bad for the economy across the board. Did you even read the article by the bonafide economist (Stanford PhD)? On what basis can you say he doesn't know what he is talking about and Ron Paul does?

Inflation certainly has not increased 20&#37; in the last three months, so I would look elsewhere for the reason the price of Similac going up 20%. It is hghly unlikely you can pin that on either low interest rates or a weak dollar either.

 

[BaronVonBigmeat]

TThey do NOT offset lowered interest rates by printing more money.

How do they make interest rates go down then?

If you look at charts of M2 or M3 or MZM, they've gone up at a rapid rate, starting after 9/11. The result was predictable--banks being sloppy with lending practices. When you flood the system with money, that's what you should expect. Especially when the Fed also engages in "moral hazard", by bailing out banks that are too big to be allowed to fail.

 

[Toro]

The Fed lowers the interest rates ONLY when inflation is low and the economy is not excessively accelerating. They do NOT offset lowered interest rates by printing more money. I'm not sure where that screwy idea came from, but Ron Paul is as wrong about that as he is wrong about a weak dollar being bad for the economy across the board. Did you even read the article by the bonafide economist (Stanford PhD)? On what basis can you say he doesn't know what he is talking about and Ron Paul does?

Inflation certainly has not increased 20% in the last three months, so I would look elsewhere for the reason the price of Similac going up 20%. It is hghly unlikely you can pin that on either low interest rates or a weak dollar either.

The effect of lowering interest rates is to print more money. The Federal Reserve sets a target for the Fed funds rate. (This is the rate you hear about when it is reported in the press that the Fed cut interest rates. On Halloween, they cut the funds rate 0.25% to 4.50%.) The Fed funds rate is the rate at which banks lend to each other at the Federal reserve banks. To effect the rate, the Fed conducts open market operations by buying and selling short-term government debt with the banks. Buying (selling) government debt drives the price of the debt up (down) which decreases (increases) the interest rate.

When the Fed buys paper from a bank, it creates a debit on the balance sheet of the bank. The bank then has more money to lend, thus increasing the money supply. Mainly, the Fed buys debt rather than selling it because the economy is usually growing. For example, if the stock of money is held constant, if the economy grows, then the demand for money will rise and so will the interest rate. To offset this natural pressure on interest rates, the Fed buys debt and creates money in the monetary system. Thus, what will effect the interest rate will be the pace of buying debt.

When the Fed lowered interest rates to 1%, it was the expressed intent of the Fed to avoid deflation brought about by the collapse of the technology bubble. In doing so, it increased the money supply at a rate unseen in decades. Over time, the nominal rate of money growth should equal the nominal rate of economic growth, though in practice, it doesn't for various reasons. However, monetary aggregates grew in excess of over 20% per year in the early part of this decade, far in excess of the rate of economic growth. The Fed lowered the growth rate of money creation a few years ago but never removed the excess money they created from 2001 through 2003 from the system.

This excess money did not seep into consumer prices. (Or, if it did, the government was not measuring it properly.) Instead, it found its way into other assets, most visibly into real estate but also into bonds, commodities such as gold and silver, and into more esoteric goods such as art and fine wines. This is normal. The creation of excess money to offset one problem often finds its way into other areas unintentionally. For example, take a look at the stock price of Google after the Fed cut rates 0.50% on August 16. It went up nearly 50% over the two months until last week. Nothing happened at Google to warrant such a meteoric ascent. Instead, it was excess liquidity finding its way into the stock.

"Inflation" is not the level of consumer prices. Inflation is excess creation of money. Where that excess money flows is unknown. Even Greenspan said in his memoir he was very uneasy about the secondary and tertiary effects of his lowering rates to 1%. Consumer prices may not be rising 20% but there certainly is, or at least was, inflation in the system.

There is absolutely no question that lowering interest rates has whacked the dollar. It was a catalyst for the top in the dollar several years ago and it certainly is a catalyst for its decline over the past weeks and months. At the moment, traders are viewing the dollar as a soft currency and the Canadian dollar, and even the Brazilian real as a hard currency.

It is my opinion that the dollar sell-off is nearing an end. However, there is no doubt in my mind that inflation exists in the monetary system and it has contributed to the decline of the dollar.

 

[Paulie]

Toro pretty much nailed it there, but to Foxfyre:

I wasn't inferring a 20&#37; inflation on the basis that the price of my baby formula has risen 20%. That's a pretty weak conclusion on your part. It was merely an example of how much the cost of goods is going up, and how much less our dollar is buying as that happens.

Toro mentioned the last few weeks to months, and throughout this whole year, that is the time period where it has hurt the most. For me, anyway.

I will admit that I'm not as educated as I would like to be about Paper/fiat vs. Gold. I'm continually educating myself on it though by researching history about it. But I can say that it sure would be nice right now if I could take my paper notes to a reserve and get some kind of hard commodity back for them...Gold, for example. If the dollar crashes, whoever has their life invested in only US dollars, is screwed. I'm not exactly in a financial situation right now where I can invest in foreign currencies, or stocks and bonds (i would never touch stocks anyway), etc.

What I HAVE been doing though, is stocking up on whatever commodities as I can. I've got about a years worth of diapers, tampons (for the old lady, of course), purified water, non-perishable food stocks, guns and ammo, a TON of junk silver coins. Doing such a thing might sound nuts, but anyone who is willing to just trust the Fed and Congress to make things right during this approach to a potential historic collapse, is the one who is nuts.

Writing off the posibility of such a thing is burying your head in the sand, and saying "it can't happen to me". It sure as hell can, and it has happened every single time in history that an empire ran it's economic policy like we do right now.

 

[Foxfyre]

Sorry guys, but I'm not buying it and I think Toro misunderstands as much as Paulitics misunderstand and unfortunately, as much as Ron Paul misunderstands.

I am sure no economist, but I know enough about basic economics to know that neither lower interest rates nor a weaker dollar are in themselves inflationary. I didn't check, but I may have misspoken earlier when I said lower interest rates do not result in a weaker dollar. What I meant to say was that lower interest rates and a weaker dollar do not necesarily extrapolate into more money being printed. Both can be extremely beneficial for both American consumers and American exporters.

I refer you again to the economist I posted earlier.

Also here:

http://www.newyorkfed.org/education/economy.html

http://www.frbsf.org/publications/federalreserve/monetary/affect.html

 

[Paulie]

I am sure no economist, but I know enough about basic economics to know that neither lower interest rates nor a weaker dollar are in themselves inflationary.

But people who ARE, prove you wrong on that. There's no other explanation.

lower interest rates and a weaker dollar do not necesarily extrapolate into more money being printed. Both can be extremely beneficial for both American consumers and American exporters.

NOTHING is beneficial about inflation.

A simple way to look at it is this:

There's 2,000 dollars that exist. You own 1,000 of them. You have 50&#37; of the supply. Another 2,000 gets printed, and added in to the system. You now only have 25% of the supply. Your dollar value just dropped 50%, and prices of goods are now going to go up to combat the decline in the purchasing power of the dollars for the people selling you the goods, who now have to pay more to get those goods they are selling.

That's what is happening in America right now.

It can only be sustained for so long. But you go ahead and listen to your econ experts, who probably wouldn't be affected that badly from a dollar crash anyway. They probably already have their contingencies in place.

By the way, that first link you provided is about as elementary an explanation of Interest Rate effects as you'll ever see. And that's coming from the friggin Fed Bank of NY, for christ's sake. Why is a couple of paragraphs on each issue sufficient for you?

 

[Foxfyre]

But people who ARE, prove you wrong on that. There's no other explanation.


NOTHING is beneficial about inflation.

A simple way to look at it is this:

There's 2,000 dollars that exist. You own 1,000 of them. You have 50% of the supply. Another 2,000 gets printed, and added in to the system. You now only have 25% of the supply. Your dollar value just dropped 50%, and prices of goods are now going to go up to combat the decline in the purchasing power of the dollars for the people selling you the goods, who now have to pay more to get those goods they are selling.

That's what is happening in America right now.

It can only be sustained for so long. But you go ahead and listen to your econ experts, who probably wouldn't be affected that badly from a dollar crash anyway. They probably already have their contingencies in place.

By the way, that first link you provided is about as elementary an explanation of Interest Rate effects as you'll ever see. And that's coming from the friggin Fed Bank of NY, for christ's sake. Why is a couple of paragraphs on each issue sufficient for you?

Did you read the article I linked that a very learned and well credentialed economist wrote? Did you read the two links from the Fed itself? Until you educate yourself, you really don't know what you are saying here.

In the Carter administration in the 1970's, interest rates soared to double digits along with double digit inflation. This, along with price controls, literally brought the U.S. economy to its knees and cost Carter any chance in a re-election bid. In the Reagan administration we saw those interest rates come down along with inflation. And with historically low interest rates now, we have much lower inflation than we had then.

Some inflation is normal and necessary and inevitable. No inflation means we are in recession. When products don't sell and prices fall because of that, we are in depression.

Did it occur to you that the cost of that Similac went up sharply during the time that interest rates had been steadily rising? Higher interest rates can increase the cost of doing business and result in higher prices. Lower interest rates generally do not.

As for the weaker dollar, the Europeans hate it, but for the Americans, it sure isn't all bad. As one economist recently quipped, if the dollar falls much further, our competitors will be outsourcing jobs to the United States. And wouldn't that be a hoot?

 

[eots]

Did you read the article I linked that a very learned and well credentialed economist wrote? Did you read the two links from the Fed itself? Until you educate yourself, you really don't know what you are saying here.

In the Carter administration in the 1970's, interest rates soared to double digits along with double digit inflation. This, along with price controls, literally brought the U.S. economy to its knees and cost Carter any chance in a re-election bid. In the Reagan administration we saw those interest rates come down along with inflation. And with historically low interest rates now, we have much lower inflation than we had then.

Some inflation is normal and necessary and inevitable. No inflation means we are in recession. When products don't sell and prices fall because of that, we are in depression.

Did it occur to you that the cost of that Similac went up sharply during the time that interest rates had been steadily rising? Higher interest rates can increase the cost of doing business and result in higher prices. Lower interest rates generally do not.

As for the weaker dollar, the Europeans hate it, but for the Americans, it sure isn't all bad. As one economist recently quipped, if the dollar falls much further, our competitors will be outsourcing jobs to the United States. And wouldn't that be a hoot?

china wont be sending us manufacturing jos until they have broken america enough to have the same conditions and wages they have there he quiped...what hoot that will be



The father of Reagonomics and former Wall Street Journal editor Paul Craig Roberts has warned that the collapsing dollar will eventually cripple the European economy and may even return the world economy to a barter system as financial chaos ensues.

Roberts served as an Assistant Secretary of the Treasury in the Reagan Administration and is a former editor and columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service.

Speaking on the Alex Jones Show yesterday, Roberts cautioned that "The loss in value of the dollar is becoming so rapid it's alarming....we've got unmanageable trade deficits, budget deficits, the economy is set for recession, the wars show no end."

Asked how bad the dollar crisis can get, Roberts responded, "It can get awfully bad - the trouble is where can they go?"

"If China removes the peg and all the surplus dollars drive up the value of the Chinese currency then given our dependence on China....it's going to drive the prices up here a tremendous amount and Americans don't have any discretionary income left," said Roberts.

"At some point the foreigners will stop financing our budget and trade deficits - then we're going to have a massive crisis the likes of which we've not experienced....if you're totally dependent on imports of manufactured goods and you can't pay for them, what do you do?" asked Roberts, explaining that the only recourse would be to print more money, pushing the dollar down even further.



Citing the fact that the dollar had lost more than 60 per cent of its value against the Euro since 2001, Roberts said that the flight from the dollar could eventually wreck the European economy because it would cripple their exports.


Asked how low the dollar could go, Roberts said that there was a limit because "There's simply so many dollars, there's not enough room in other currencies to absorb them - at some point the flight of investors from the dollar to the Euro will cause amazing troubles in Europe - they won't be able to export anything because the prices are driven up so high."

Roberts said investors will eventually desert the Euro as a safe haven from the dollar and the same process will cause a crisis in Britain as the pound is devalued due to exports being hit.

"Wages are being frozen, profit margins are shrinking, exports are down - so it's starting to impact on Europe," said Roberts.

Roberts warned that the potential destruction of the dollar as the world's reserve currency could eventually return us to a system of barter, completely altering the landscape of the economic structure as we know it.

 

[Foxfyre]

china wont be sending us manufacturing jos until they have broken america enough to have the same conditions and wages they have there he quiped...what hoot that will be



The father of Reagonomics and former Wall Street Journal editor Paul Craig Roberts has warned that the collapsing dollar will eventually cripple the European economy and may even return the world economy to a barter system as financial chaos ensues.

Roberts served as an Assistant Secretary of the Treasury in the Reagan Administration and is a former editor and columnist for the Wall Street Journal, Business Week, and Scripps Howard News Service.

Speaking on the Alex Jones Show yesterday, Roberts cautioned that "The loss in value of the dollar is becoming so rapid it's alarming....we've got unmanageable trade deficits, budget deficits, the economy is set for recession, the wars show no end."

Asked how bad the dollar crisis can get, Roberts responded, "It can get awfully bad - the trouble is where can they go?"

"If China removes the peg and all the surplus dollars drive up the value of the Chinese currency then given our dependence on China....it's going to drive the prices up here a tremendous amount and Americans don't have any discretionary income left," said Roberts.

"At some point the foreigners will stop financing our budget and trade deficits - then we're going to have a massive crisis the likes of which we've not experienced....if you're totally dependent on imports of manufactured goods and you can't pay for them, what do you do?" asked Roberts, explaining that the only recourse would be to print more money, pushing the dollar down even further.



Citing the fact that the dollar had lost more than 60 per cent of its value against the Euro since 2001, Roberts said that the flight from the dollar could eventually wreck the European economy because it would cripple their exports.


Asked how low the dollar could go, Roberts said that there was a limit because "There's simply so many dollars, there's not enough room in other currencies to absorb them - at some point the flight of investors from the dollar to the Euro will cause amazing troubles in Europe - they won't be able to export anything because the prices are driven up so high."

Roberts said investors will eventually desert the Euro as a safe haven from the dollar and the same process will cause a crisis in Britain as the pound is devalued due to exports being hit.

"Wages are being frozen, profit margins are shrinking, exports are down - so it's starting to impact on Europe," said Roberts.

Roberts warned that the potential destruction of the dollar as the world's reserve currency could eventually return us to a system of barter, completely altering the landscape of the economic structure as we know it.

I wonder how well Roberts was quoted here and how well his message has been interpreted. This would be same Roberts who said:

After convincing themselves and many others on the basis of this fundamental error that the U.S. was dangerously dependent on foreign capital, economists began warning of the consequences. The inflow of foreign money to finance our consumption, they declared, was keeping the dollar high, thus wrecking the competitiveness of U.S. industry. Furthermore, our addiction to foreign capital meant that the U.S. would have to maintain high interest rates in order to continue to attract the money, thus undermining U.S. investment and deindustrializing America. If U.S. interest rates or the dollar were to fall, foreign capital would flee, depriving us of financing for the "twin deficits."

This doomsday scenario was picked up by journalists and kept international markets unnerved. U.S. economic policy came under ever-stronger criticism from our allies. America's "twin deficits" became the scapegoat for every country's problems.

Then, in the autumn of 1985, Secretary of the Treasury James A. Baker III engineered the political fall of the dollar, which plunged, along with U.S. interest rates, in 1986 and 1987. Remarkably, foreign capital inflows to the U.S. promptly doubled.

http://www.nationalreview.com/reagan/roberts200406101413.asp

We are not talking about the destruction of the dollar here. We are talking about allowing an overvalued dollar to fall so that we are more competitive with our trading partners. Read again the article from the economist I posted. He said the dollar has quite a bit more value it can give before the dollar is in any kind of trouble. I see no reason to disbelieve him based on what I have read from others, including Dr. Roberts.

 

[eots]

I wonder how well Roberts was quoted here and how well his message has been interpreted. This would be same Roberts who said:

http://www.nationalreview.com/reagan/roberts200406101413.asp

We are not talking about the destruction of the dollar here. We are talking about allowing an overvalued dollar to fall so that we are more competitive with our trading partners. Read again the article from the economist I posted. He said the dollar has quite a bit more value it can give before the dollar is in any kind of trouble. I see no reason to disbelieve him based on what I have read from others, including Dr. Roberts.

well we will know very soon

 

[Toro]

Sorry guys, but I'm not buying it and I think Toro misunderstands as much as Paulitics misunderstand and unfortunately, as much as Ron Paul misunderstands.

I am sure no economist, but I know enough about basic economics to know that neither lower interest rates nor a weaker dollar are in themselves inflationary. I didn't check, but I may have misspoken earlier when I said lower interest rates do not result in a weaker dollar. What I meant to say was that lower interest rates and a weaker dollar do not necesarily extrapolate into more money being printed. Both can be extremely beneficial for both American consumers and American exporters.

I refer you again to the economist I posted earlier.

Also here:

http://www.newyorkfed.org/education/economy.html

http://www.frbsf.org/publications/federalreserve/monetary/affect.html

It is true that lower interest rates and a weaker dollar do not always extrapolate into more money being printed. However, it certainly has been the case in the United States over the past decade.

Of course, it is enormously beneficial for consumers to have lower interest rates in the near term. But, if that's always the case, why not set the interest rate to 0&#37; all the time? Because such irresponsible monetary policies would be ruinous to the economy, as it has been in places like Latin America in the past, and is in Zimbabwe today.

As Milton Friedman said, inflation is everywhere and always a monetary phenomenon. And the Fed controls the money supply through interest rates.

http://www.uri.edu/artsci/newecn/Classes/Art/INT1/Mac/1970s/Money.supply4.html