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Pastimes : Clown-Free Zone... sorry, no clowns allowed
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To: Lucretius who wrote (46107)12/11/2000 12:37:31 PM
From: eddieww  Read Replies (2) of 436258
 
Those who know more about monetary policy, help me out here.

We have been running a $400 billion trade deficit.
Foreigners hold around 40% of US Treasury debt, a large portion of corporate paper, and around 20% of US equities. They have been "vendor financing" our expansion the past few years while the dollar has been getting stronger.
If it becomes clear to the Fed that the bubble is bursting and the econ slowing quickly, why wouldn't it make very good sense to debase the dollar as quickly as possible as we begin to enter the "payback" phase? Not only would we be paying back, for instance, $.75 on the $1, but we would lower the cost of US products to the rest of the world just when we have built up maximum production capacity. Also, in this case, the indexes would stop their slide although they may stay stagnant vs inflation, which would soar.
What's wrong with this picture?
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