Mish, there might be a few surprises in store. The FED and all the world's CB governors know precisely what is going on, and they drink each others bath water. They are all in the same game, up to their eyeballs, the fiat game, and they will protect this game to the end. If the US lowers rates, she does so not in isolation, but after consultation, and whatever the ECB does will also have been pre-determined.
The CBs are not independent from their political masters, and they know it. They will NOT act alone to precipitate a world crisis without careful consideration/consultation. Perhaps, rather than risk a major crisis, the US and the rest of the world may have to accept an even lower dollar.
Besides, the US is not the whole damn world, although it seems like it. Looking at prices of all commodities, they have barely moved when seen through European eyes for example. The recent increased cost of the commodity input factor is negligible to these folks, and therefore makes their products more competitive visa-vie the US, and will partly make up for the exchange difference.
As I see it, the US must accept a lower dollar and therefore a lower standard of living. This is a painful process, and will undoubtedly result in scaling back of expensive imports.
Rather than risk a crisis, they will delay and spin, trying to buy time and hope for a solution. So this game can go on and on.
You see all the CBs as equally irresponsible. Perhaps you're right. I respect that you've put your money where your mouth is. Time will tell. |
