The dollar is declining, with no apparent support. That’s because the recessionary factors seem to be dominating. But a reporter’s question about what factors might support the dollar prompted me to think about other influences that might work in a direction opposite the forces alluded to in the conventional wisdom.
Money creation and the Federal Reserve
There seem to be some misconceptions about the monetary consequences of actions that the Federal Reserve has taken to address liquidity needs.
If Iraq becomes West Germany
Some people have argued that the occupation of Iraq could evolve into a West Germany type situation. CBO has assessed the costs of this eventuality.
The President Prognosticates (on the Economy)
From the LA Times:
Forward rates and inflation expectations
Forward rates on Treasury bonds tell an interesting story about the market’s reaction to the Fed’s interest rate cut on Tuesday.
Divining the Dollar
The dollar declines in response to the drop in the target Fed Funds rate. What next?
50 it is
For the first time in 5 years, markets were actually unsure what the Fed was going to do, with yesterday’s fed funds options calling it an even chance that the Fed would settle for a 25-basis-point cut or go all the way to 50. Capital Chronicle had prepared amusing posters as to just how to interpret a 25-basis-point as opposed to a 50-basis-point cut. Fifty it was, disappointing perhaps knzn who wanted a 175-basis-point cut, but delighting economic researchers like Refet Gurkaynak and Eric Swanson who both emailed me their high spirits at finally getting another data point for what happens when the Fed surprises the markets.
Four Observations on Import and Export Prices and the Dollar
Some delayed reflections on exchange rates, trade prices, and the messages from the August data.
Economic indicators of success in Iraq
Some economists have been interpreting economic developments as shedding light on the success of the military surge in Iraq. I think one needs to use a bit of caution in drawing conclusions from such evidence.
Is Bush an Economic Conservative? Does He Analyze?
Greenspan says no, on both counts.