To: Freedom Fighter who wrote (210781 ) 12/19/2002 11:02:38 PM From: Perspective Read Replies (1) | Respond to You have a good point that I hadn't considered: perhaps the Fed doesn't have nearly as much control over the dollar as I'm assuming. However, they certainly have control over the price of money and the pressure on the money supply, and I do believe that variations in the money supply *eventually* show up in the currency markets. While it doesn't represent a shift from the "pedal to the floor" money supply jam that's been happening for the better part of a decade, Bernanke and AG are now admitting that they can't prevent a general deflation without sacrificing the currency, and voicing that decision is *huge*. Had they been successful in turning things around here, they could have permitted interest rates to rise to free market levels, rescuing the dollar in the process thanks to a combo of decent rates of return on US treasuries, currency stability, and flight to quality. Instead, they are admitting that they must sacrifice the dollar and the foreign capital inflows in order for us to take the bitter medicine and reduce the current account deficit.
