Monetary Policy

I love how the fact that the dollar is relatively weak against the major foreign currencies in Europe has made everyone an expert in international monetary policy. Major factors cited for the weakness include 1) the war 2) nobody likes the U.S. so they don’t want dollars, and 3) the federal budget deficit, but when I’ve asked them to explain further, they really can’t explain exactly how those factors actually affect the exchange rate. I don’t understand it either. Since those factors are three important geopolitical things going on right now, I’m sure they do have some effect, but what that is or how it works is mostly a mystery to me and I think to most people, whether they admit it or not.

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One Response

  1. Wonderful observation. You’re right — one thing goes wrong, and everyone is an expert — especially when it comes to the U.S.

    Only problem with those theories is that almost all those factors have been in effect in some form or other for the last 60 years (when have we not had a war somewhere, and when were we last out of debt, and I think the American Revolution was the last time France liked us — though apparently the movie “Ratatouille” has made them think better of us), so blaming those factors doesn’t make sense. They probably all play a part, but I don’t see how the “man on the street” would logically make a connection to them when they are clearly not new factors.

    But I do love your observation that suddenly everyone is an expert. It’s so true.

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