If you think we have a strong dollar policy and that the FED and Treasury prefer a strong dollar, think again. As Gary pointed out at his Fraudonomics blog:
Although it is not stated in the article, the substantial adjustment in the value of the U.S. dollar will be in the downward direction.
Gary was commenting on a recent Forbes.com/Reuters story:
PARIS, June 22 (Reuters) – An increase in exports is needed for a sustained recovery in the United States and this may require an adjustment in the value of the U.S. dollar, IMF chief economist Olivier Blanchard said on Monday.
‘For the US, it is absolutely no question that a sustained recovery has to come from a large increase in exports, that may not be very easy to do. This may require fairly substantial adjustments in the dollar,’ he told a conference.
A strong dollar will make American goods too expensive for foreigners to import. Therefore, we have to weaken the dollar to increase exports. You may have noticed that many other countries started printing tons of their own currencies as soon as the US started doing it. The reason? They want to make sure their currencies are weak, as well. Otherwise, everyone will be buying American goods as opposed to their’s.
This has been described as a new form of protectionism without directly calling it that. We won’t tax incoming imports. We’ll just make dollars so cheap that Americans and foreigners will buy “Made it America” instead of the crap coming out of other countries. (One reason the Chinese have pegged to our currency is so that they can make sure they stay in direct competition with us as we jack around with the Dollar).