Quote:
Originally Posted by sck5
Never in the history of the US has monetary policy been aimed at the exchange rate if internal concerns dictated otherwise. There is no way that is going to change in the near future. And it is very true that that if they keep pumping money out while the economy is tanking and foreigners are not wanting to hold them then the only possible outcome is more inflation.
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Actually that is only completely wrong, not just partially wrong. since leaving the gold standard, we've had nothing else to base our monetary policy on than the exchange rate. Inflation, interest rates, etc... are all reflected in the exchange rate. Think of it as a measure of how the rest of the world feels about our credit worthiness.