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Politics : Formerly About Applied Materials
AMAT 270.18+0.9%10:39 AM EST
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To: zonder who wrote (69953)4/23/2003 2:03:33 PM
From: Sun Tzu  Read Replies (1) of 70976
 
My last post on this.

Interest rates and other tools of the trade at the disposal of Fed are indirect (and some would argue weak) weapons for currency manipulation. The Fed does not set the interest rates the banks can charge. Supply and demand for credit sets that. No matter how you slice it, the fundamentals will eventually catch up and they do so faster in an open capitalistic economy than elsewhere. Therefore what strong dollar policy really means is that (a) we have good economic foundations and (b) please trust us that we will do what we can to keep it going smoothly and not disturb the apple cart. The idea being that if you are willing to accept lower returns on your investments here, then in turn we will do what we can to make sure your investments are safe (read smooth and not bumpy). A shift towards market policy on the other hand means you make no such promises because you believe the market knows best and will wring out the excesses. And finally a weak dollar policy means you want dollar to be weaker so that you can shape economic activity.

Personally I think the administration wants weaker dollar but is disguising it as market policy. But since I have no way of reading their mind, my opinion here is as good as the contrary.

BTW, It is true that I majored in semiconductor and computer design, but I also got a minor in economics with never a grade below A+...If I thought I would have as exciting of a career in econ, I would have let my prof talk me out of engineering and into econ.

ST
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