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Nice. 2 observations.First, Bernanke shows he doesn't know that he can set interest rates for US banks at whatever maturity he wants to if he thinks he needs to lend to foreign cbs in order to "stabilize foreign dollar markets" that US banks borrow in.Second, Bernanke was actually right when he said it was a coincidence that the dollar gained 20% just as the swaps were occurring. It would have gained a lot more without the swaps.Good to see this showing up . . . maybe he did see your blog.Best,Scott
Yes, the Congressman didn't get that point on the dollar or had it confused--backward. (Was he unhappy that the dollar gained?) He should have asked why the Fed limited the rally in the dollar and by corollary, reduced the purchasing power and real terms of trade of Americans.
YES ...THEY SHOULD EXPLORE WHYWHY THE GOOD OLD USA DID NOT TAKE THE DOLLAR TO A VERY SHARP SPIKE !!!!IF WE BELIEVED IN CREATIVE DESTRUCTION THEN WE WOULD HAVE DESTROYED BANKS WORLD WIDE WHICH WOULD HAVE DESTROYED US, BUT AFTER A BRIEF SPIKE HIGH.THE WORLD OWES US TO OUR QUICK THINKING AND MERCY SO TO SPEAK.THE SWAPS WERE PROFITABLE BUT AT THE SAME TIME SUSTAINABLE TO THE REST OF THE WORLD GIVEN THE FLIGHT TO THE DOLLAR QUALITY.ANYONE IN PARADIGM AND READING NORMANS' THEORY OF CAPACITY BLOG WOULD HAVE TO UNDERSTAND THIS WITH EASE.PLUS THE ELASTIC CURRENCY THEORY MEANT THAT THE MONETARY BASE HAD TO EXPAND.I EMAILED THE FOREIGN SWAP NOTES FROM NORMAN'S BLOG TO KRUGMAN AND TO MY CONGRESSMAN FOR SURE.SURE, OUR PURCHASING POWER WOULD HAVE PUT US ON A WORLD WIDE GOBBLE FEST, BUT THAT WOULD HAVE LEAKED OUR DOLLARS OUT TO BROKEN ECONOMIES WHICH WOULD HAVE HAD TO INCREASE THEIR OWN INTEREST RATES TO VERY HIGH LEVELS ( SINCE EVERYONE RAN TO THE DOLLAR ) AND THIS WOULD HAVE CAUSE A LOT OF MONEY TO LEAVE THE USA.SINCE ONLY 20% WAS MADE ON THE DOLLAR SO FAR ( PLUS THE BENEFIT OF ELLIMINATING THE BUSH II INFLATION WHERE THE DOLLAR WAS BEING DRAGGED DOWN ), THENIT WOULD BE GOOD TO INVEST IN PLACES LIKE CHINA, BUT NOT TO BE CAUGHT WITH ALL ASSETS OUT OF THE USD.
Also . . . Without the currency swaps, Peter Schiff's investors would have lost WAY more than they did. Schiff thinks the Fed is evil, and so do most that invest with him, but they should all thank their lucky stars the Fed did the swap arrangements or they may have lost everything since they are all clueless about how a flex fx monetary system works.Scott
Yes...how wonderful that would have been!
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