The price of the US Dollar is decided by international markets. The US does not manipulate its currency prices. Most economists in the US are very happy with this situation.
The only governmental force which might change the value of the dollar on purpose, by increasing or decreasing the amount of dollars available, is the Fed. The Fed's primary goal right now is to prevent deflation. All of its actions have been entirely consistent with its goal of preventing deflation, and just about every economist in the universe agrees qualitatively with the Fed's behavior, though there's wide disagreements on just how much they should print.
Deliberately printing money for the purposes of a trade war would be inflationary stupidity and would be a shocking move from an institution that had, in the past, actually prolonged a recession in order to maintain a stable currency. (Inflation doves like Paul Krugman would suggest that the Fed is doing that a second time, right now.)
REP. HENRY WAXMAN: Do you feel that your ideology pushed you to make decisions that you wish you had not made?
ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not.
And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.
REP. HENRY WAXMAN: You found a flaw in the reality…
ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?
ALAN GREENSPAN: That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
That's an interesting quote, but I'd like you to clarify what it has to do with what I'm saying. Judging by the actions and commentary of just about everyone, neither Greenspan nor anybody else seems willing to throw out monetary policy entirely, and I caution you not to misread Greenspan's words that way.
Much of "conventional wisdom" is political meme. There has been a shift in perspective (an "ideological change") among many economists (though Krugman is not necessarily one of them). MMT goes against "conventional wisdom" -- I am saying read the link for an overview of MMT.
Like the conventional wisdom that house prices can only go up? Or there's no more boom and bust? There is no conventional wisdom, it's all speculation, especially as it tends to play out over generations and not political terms.
We've got a strong communist partially planned economy in a capitalist market, which has a currency that's got a weird valuation from a centrally planned bank fighting a currency war.
And that bank is deliberately manipulating the price of the dollar.
When has it happened before? So what wisdom can there be?
To say that it's FUD and that the Fed isn't going to at least consider what to do about that and they are going to always stick to a particular course regardless of the actions of the Chinese seems premature.
How the hell can anyone know what's going to happen? Or how the Chinese are going to act in the next 5-10 years?
I agree with your assessment of the Fed's influence on the dollar, but I think it's wrong to say that it's the "only governmental force." For example, if Congress decides to cut spending by 50% (hypothetical obviously :P), assuming the anti-bias government provisioning system, some of the cuts will come from goods abroad. That reduces the demand for, say, the Euro relative to the Dollar, and thus causes the Dollar to rise relative to the Euro.
Comments
This is FUD, here's why.
The price of the US Dollar is decided by international markets. The US does not manipulate its currency prices. Most economists in the US are very happy with this situation.
The only governmental force which might change the value of the dollar on purpose, by increasing or decreasing the amount of dollars available, is the Fed. The Fed's primary goal right now is to prevent deflation. All of its actions have been entirely consistent with its goal of preventing deflation, and just about every economist in the universe agrees qualitatively with the Fed's behavior, though there's wide disagreements on just how much they should print.
Deliberately printing money for the purposes of a trade war would be inflationary stupidity and would be a shocking move from an institution that had, in the past, actually prolonged a recession in order to maintain a stable currency. (Inflation doves like Paul Krugman would suggest that the Fed is doing that a second time, right now.)
REP. HENRY WAXMAN: Do you feel that your ideology pushed you to make decisions that you wish you had not made?
ALAN GREENSPAN: Well, remember that what an ideology is, is a conceptual framework with the way people deal with reality. Everyone has one. You have to — to exist, you need an ideology. The question is whether it is accurate or not.
And what I’m saying to you is, yes, I found a flaw. I don’t know how significant or permanent it is, but I’ve been very distressed by that fact.
REP. HENRY WAXMAN: You found a flaw in the reality…
ALAN GREENSPAN: Flaw in the model that I perceived is the critical functioning structure that defines how the world works, so to speak.
REP. HENRY WAXMAN: In other words, you found that your view of the world, your ideology, was not right, it was not working?
ALAN GREENSPAN: That is — precisely. No, that’s precisely the reason I was shocked, because I had been going for 40 years or more with very considerable evidence that it was working exceptionally well.
(http://pragcap.com/resources/understanding-modern-monetary-s...)
That's an interesting quote, but I'd like you to clarify what it has to do with what I'm saying. Judging by the actions and commentary of just about everyone, neither Greenspan nor anybody else seems willing to throw out monetary policy entirely, and I caution you not to misread Greenspan's words that way.
Read the linked-to page.
Why should I read what you're linking if you can't even be bothered to tell me why?
That, and your attitude of "this blog post disproves conventional wisdom" is a serious red flag.
Much of "conventional wisdom" is political meme. There has been a shift in perspective (an "ideological change") among many economists (though Krugman is not necessarily one of them). MMT goes against "conventional wisdom" -- I am saying read the link for an overview of MMT.
Like the conventional wisdom that house prices can only go up? Or there's no more boom and bust? There is no conventional wisdom, it's all speculation, especially as it tends to play out over generations and not political terms.
We've got a strong communist partially planned economy in a capitalist market, which has a currency that's got a weird valuation from a centrally planned bank fighting a currency war.
And that bank is deliberately manipulating the price of the dollar.
When has it happened before? So what wisdom can there be?
To say that it's FUD and that the Fed isn't going to at least consider what to do about that and they are going to always stick to a particular course regardless of the actions of the Chinese seems premature.
How the hell can anyone know what's going to happen? Or how the Chinese are going to act in the next 5-10 years?
I agree with your assessment of the Fed's influence on the dollar, but I think it's wrong to say that it's the "only governmental force." For example, if Congress decides to cut spending by 50% (hypothetical obviously :P), assuming the anti-bias government provisioning system, some of the cuts will come from goods abroad. That reduces the demand for, say, the Euro relative to the Dollar, and thus causes the Dollar to rise relative to the Euro.