Caroline Baum: Dollar Policy for Dummies

Caroline Baum has a great column at Bloomberg News today about U.S. Dollar policy. The basic thrust of the column was about asking Ben Bernanke to put his money where his mouth is. The Fed can talk all it wants — about the Dollar and anything else it affects. But if it’s not willing to do something about it, consider it just talk and a lot of hot air.

Ben Bernanke came out in defense of the Dollar this week, marking the first time in quite a while that the Fed has had anything to say about the Dollar. But, did he really say anything important? Bernanke said, `in collaboration with our colleagues at the Treasury, we continue to carefully monitor developments in foreign exchange markets.”

So what? Are you actually going to do anything about it?

As I see it, with the U.S. economy flat on its back, the mortgage mess still a mess, and Lehman Brothers looking a lot like Bear Stearns, the Fed is not going to raise interest rates. They may hold off lowering rates, but they are not raising them. But, the Fed has lowered rates to 2%, a full two percent below inflation. It’s like getting paid to borrow money.

Bernanke can sell the concept all he wants about supporting a strong dollar. I’m not buying it.

Dollar Policy for Dummies, Dimwits and Dolts: Caroline Baum, Bloomberg News, 06 June 2008

For Caroline Baum’s column, see my blogroll on the sidebar.

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