Fed chief warned on inflation target

[jk]

Re: Fed chief warned on inflation target

Depreciating the currency decreases real wages and makes labor cheaper. But just for the workers being paid in that currency. Foreigners' real wages are unaffected, so the depreciating currency appears to domestic consumers as "rising import prices".

In the run, it's a self-destructive policy. First of all, it's dishonest,

well, then the fed would never stand for it.:rolleyes:

since it relies on the Keynesian ruse of trying to fool people into thinking their wages are holding up when they're being cut. Second, it penalizes saving because the saver's dollars depreciate, and penalizing saving is not exactly what our consumption-heavy economy needs.

but it's exactly what our debt-heavy economy needs

Third, the amount of currency depreciation to rectify global imbalances is enormous, and the amount of inflation that would be required to deal with them with currency as the only tool would be catastrophic for the middle class.

:eek: - tell ben!

Want import prices to rise? Tax them. It's not as if the government isn't running deficits. Even if it wasn't, you could use the revenue to cut taxes on domestic production (income taxes) and make trade freer right here at home where we need it most. This would allow you to keep employment strong without cutting wages, and even increase after tax pay, making the American worker better off, not worse. Domestic production would increase, since the rewards for producing would increase. The cost of consuming foreign production would increase, helping to balance the current account deficits that threaten our economic future. You'd also decrease dependence on foreign oil. You'd decrease dependence on foreign funding for our deficits. As our deficits have gotten progressively worse, it’s the policy option that we haven’t tried.

didn't we try this once? let me see.... smoot-hawley?

[Tet]

Re: Fed chief warned on inflation target

I'm curious about whether the collective wisdom of iTulip thinks an all out attack by the US on Iran would trigger this panic?

I think the chances that Uncle Ben will slip up and say the market is a scam are higher than there being a tiny attack, a medium attack, a large attack or an all out attack on Iran.

[WDCRob]

Re: Fed chief warned on inflation target

In the hypothetical event the US attacks Iran, would there be a net flight to the dollar, or away from it? Where would gold be the next day? Would the Fed react overnight?

Pick another similar major event where the US gains international condemnation for its actions if you think Iran is completely impossible.

[Tet]

Re: Fed chief warned on inflation target

In the hypothetical event the US attacks Iran, would there be a net flight to the dollar, or away from it? Where would gold be the next day? Would the Fed react overnight?

Pick another similar major event where the US gains international condemnation for its actions if you think Iran is completely impossible.

Simply announce that OPEC will start accepting Euro's for oil, that would be quite confusing for everyone until they figured out what happens when the Euro needs to create more currency to support oil sales. The Federal Reserve has accomplished it's goal, they've chased everyone who is no one out of the d0llar already. The bag has been officially passed and since the Federal Reserve is the one holding the d0llar bag, what the rest of the world is holding goes down and the d0llar heads higher. That's how the game is played. Uncle Buck had his heart attack and crashed well over a year ago. I started betting against Uncle Buck when he was at 110. The money has already been made on the short side, now it's the long sides turn. Until I can start printing my own money, I'm not betting against the Fed and the Fed certainly looks right now like they've just about got everybody betting the wrong direction, which is what they do best.

[Finster]

Re: Fed chief warned on inflation target

Want import prices to rise? Tax them. It's not as if the government isn't running deficits. Even if it wasn't, you could use the revenue to cut taxes on domestic production (income taxes) and make trade freer right here at home where we need it most. This would allow you to keep employment strong without cutting wages, and even increase after tax pay, making the American worker better off, not worse. Domestic production would increase, since the rewards for producing would increase. The cost of consuming foreign production would increase, helping to balance the current account deficits that threaten our economic future. You'd also decrease dependence on foreign oil. You'd decrease dependence on foreign funding for our deficits. As our deficits have gotten progressively worse, it’s the policy option that we haven’t tried.?

didn't we try this once? let me see.... smoot-hawley?

Not to address the mess we have now. In fact we've tried it for most of the history of the republic. It's only been in the past decade or two that we've been increasingly substituting import tax revenue for domestic production tax revenue. Not incoincidentally, it's been in the past decade of two that our currency account deficit has gone past the red line and we've gone from being a creditor nation to a debtor nation.

Smoot-Hawley is the same tripe that gets trotted out every time someone questions the globalist agenda promoted by the Wall-Washington Axis of Profit. It did NOT cause the Great Depression. According to Alan Greenspan (yes, the same one who ran the Fed for nearly twenty years), it was the Fed. He wrote in 1966 (http://www.321gold.com/fed/greenspan/1966.html):

... When business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. More disastrous, however, was the Federal Reserve's attempt to assist Great Britain who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain's gold loss and avoid the political embarrassment of having to raise interest rates. The "Fed" succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market-triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed. Great Britain fared even worse, and rather than absorb the full consequences of her previous folly, she abandoned the gold standard completely in 1931, tearing asunder what remained of the fabric of confidence and inducing a world-wide series of bank failures. The world economies plunged into the Great Depression of the 1930's...

Yale University professor of economics Robert Shiller has specifically addressed the putative connection between Smoot-Hawley and the Great Depression and totally debunked it. From Irrational Exuberance, pages 84-85:

... It is conceivable that the Smoot-Hawley tariff might have been expected to hurt the outlook for U.S. corporate profits. One could have thought that it might have been expected to benefit corporations, many of whom actively sought the tariff … other economists, including Rudgier Dornbusch and Stanley Fischer, pointed out that exports were only 7% of the gross national product (GNP) in 1929 and that between 1929 and 1931 they fell by only 1.5% of 1929 GNP. This hardly seems like the cause of the Great Depression. Moreover, they pointed out that it is not clear that the Smoot-Hawley tariff was responsible for the decline in exports. The depression itself might be held responsible for part of the decline. Dornbusch and Fischer showed that the 1922 Fordney-McCumber tariff increased tariff rates as much as the Smoot-Hawley tariff, and the Fordney-McCumber tariff was of course followed by no such recession...

[SSmith]

Re: Fed chief warned on inflation target

Alfred Eckes devotes an entire chapter to defending the Smoot-Hawley Tariff in his book, "Opening America's Market: U.S. Foreign Trade Policy Since 1776." If I remember correctly, Eckes argues that it was in some ways a tariff reduction, but that, in any case, it had little to do with causing or worsening the Great Depression. As the quote from Shiller suggests, the U.S. had significant tariff protection for its industry in the late 19th and early 20th centuries.