http://www.reuters.com/article/2014/01/15/us-markets-forex-idUSBRE9BJ0EF20140115
According to this article, recently released reports are showing that the value of the dollar in the global currency market is climbing. Just as the value of the dollar is increasing, the values of both the Euro and the Australian dollar have both fallen recently as well. As I stated in my previous blog, the value of our currency as well as other currencies has a direct effect on the price of foreign imports. Since the United States purchases a huge amount of imported goods from China and other asian countries, the value of the dollar has a great effect on the prices of those goods.
After seeing this increase in the value of the dollar, Chicago Federal Reserve President Charles Evans has stated that the Fed is considering winding down some its bond-buying programs which are used to inflate the value of the dollar if the economy strengthens. In my opinion, it's a reassuring sign to see the dollar gaining value against other currencies. Hopefully this progress will continue throughout the year as the economy continues to recover.
While the Federal Reserve can promote short-term economic growth through inflation, it is best for long-term economic growth to be achieved naturally, and a stronger U.S. dollar will result in lower priced foreign goods, which will hopefully result in greater consumer spending. As we've all learned, greater consumer spending leads to higher incomes, and this is a legitimate way to spark economic growth.
Wednesday, January 15, 2014
CORNYN and BRADY: Federal Reserve’s morphine to Wall Street leaves middle class out of recovery
http://www.washingtontimes.com/news/2014/jan/12/coryn-and-brady-a-centennial-checkup-for-the-dolla/?page=all
Since the housing market crash of 2008, it's plain to see that Wall Street has more than recovered from the greatest economic downturn our nation has seen since the Great Depression. With the Dow Jones at an all-time high and stock prices climbing higher and higher, you might be tempted to think that the recession is over. But the truth is that the middle class has still not fully recovered from the recession, and the Federal Reserve's current policies regarding inflation and economic growth have not helped. This article describes how inflation has resulted in a devaluation of the dollar globally, which has had deep effects on American consumer's pocketbooks.
Over the past decade, the U.S. Dollar has been on a downward trend on the global currency market. This downward trend has had global implications, particularly the loss of buying power for the U.S. Dollar in international commerce. Simply put, when the value of the dollar against other currency falls, the price of foreign goods will rise. This affects the price of all kinds of products which are imported to the U.S., like gasoline. While the author does admit that the recent European financial crisis has helped increase the value of the dollar, the Federal Reserve still must be wary of promoting too much inflation for this reason.
In my opinion, there is little the Federal Reserve can do at the moment to shrink unemployment and stimulate real growth in the economy, as many businesses are still not confident enough in the economy to hire new workers. Perhaps that will start to change this year, but until then it may be a good idea for the Fed to lay low for a while.
Since the housing market crash of 2008, it's plain to see that Wall Street has more than recovered from the greatest economic downturn our nation has seen since the Great Depression. With the Dow Jones at an all-time high and stock prices climbing higher and higher, you might be tempted to think that the recession is over. But the truth is that the middle class has still not fully recovered from the recession, and the Federal Reserve's current policies regarding inflation and economic growth have not helped. This article describes how inflation has resulted in a devaluation of the dollar globally, which has had deep effects on American consumer's pocketbooks.
Over the past decade, the U.S. Dollar has been on a downward trend on the global currency market. This downward trend has had global implications, particularly the loss of buying power for the U.S. Dollar in international commerce. Simply put, when the value of the dollar against other currency falls, the price of foreign goods will rise. This affects the price of all kinds of products which are imported to the U.S., like gasoline. While the author does admit that the recent European financial crisis has helped increase the value of the dollar, the Federal Reserve still must be wary of promoting too much inflation for this reason.
In my opinion, there is little the Federal Reserve can do at the moment to shrink unemployment and stimulate real growth in the economy, as many businesses are still not confident enough in the economy to hire new workers. Perhaps that will start to change this year, but until then it may be a good idea for the Fed to lay low for a while.
Subscribe to:
Comments (Atom)