The devaluation and the rapid increase in money supply it permitted ended the U.S. deflation remarkably quickly. Indeed, consumer price inflation in the United States, year on year, went from -10.3 percent in 1932 to -5.1 percent in 1933 to 3.4 percent in 1934.17 The economy grew strongly, and by the way, 1934 was one of the best years of the century for the stock market. If nothing else, the episode illustrates that monetary actions can have powerful effects on the economy, even when the nominal interest rate is at or near zero, as was the case at the time of Roosevelt's devaluation.
This could be a boom for anyone who exports, US quality is well accepted, price has always been a problem...
Perhaps this is a way to conserve some purchasing power for US workers (assuming inflation is not ignited, which under current environment, it does not seem a problem)
More importantly... if the Fed is so geared to fight deflation... I wonder who has deeper pockets... Shorts, or the US Treasury -ggg
The Fed is the "de facto Central Bank for te world".
[let's see how the Euroland gov's react to their coin being valued above US parity]
Of course, the U.S. government is not going to print money and distribute it willy-nilly (although as we will see later, there are practical policies that approximate this behavior)
Where is the line... I have a number of ideas where I could use some... -g
8 Normally, money is injected into the economy through asset purchases by the Federal Reserve. To stimulate aggregate spending when short-term interest rates have reached zero, the Fed must expand the scale of its asset purchases or, possibly, expand the menu of assets that it buys. Alternatively, the Fed could find other ways of injecting money into the system--for example, by making low-interest-rate loans to banks or cooperating with the fiscal authorities
Hmmm, I wonder where interest rates are headed....?
time to buy more real estate ? -g |
