> Michael Hudson: The United States always has steered its monetary policy > almost exclusively with domestic objectives in mind. This means ignoring the > balance of payments. Like the domestic U.S. economy itself, the global > financial system also is all about getting a free lunch. When Europe and > Asia receive excess dollars, these are turned over to their central banks, > which have little alternative but to recycle these back to the United States > by buying U.S. Treasury bonds. Foreign governments – and their taxpayers – > are thus financing the domestic U.S. federal budget deficit, which itself > stems largely from the war in Iraq that most foreign voters oppose. > > Supporting the dollar's exchange rate by the traditional method of raising > interest rates would have a very negative effect on the stock and bond > markets – and on the mortgage market. This would lead foreign investors to > sell U.S. securities, and likely would end up hurting more than helping the > U.S. balance of payments and hence the dollar's exchange rate. > > So Bernanke is merely being polite in not rubbing the faces of European and > Asian governments in the fact that unless they are willing to make a > structural break and change the world monetary system radically, they will > remain powerless to avoid giving the United States a free ride – including a > free ride for its military spending and war in the Near East.
why does the Fed have to support the dollar exchange rate? Why not simply enjoy an export surge? -- Jim Devine / "Segui il tuo corso, e lascia dir le genti." (Go your own way and let people talk.) -- Karl, paraphrasing Dante. _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
