Can the Federal Reserve board reverse the trend of the falling dollar?
by economy on 06/09/09 at 4:28 am
I am not an economist so I dont know, but I hear on the news that the Federal Reserve Board isn’t making it a priority to reverse the trend. If they really wanted to focus on making a stronger dollar would they be able to?
I am not an economist so I dont know, but I hear on making a priority

One Comment
Andrew S
Sep 6th, 2009
The Fed is really the only government agency that would be able to make the dollar appreciate vis-a-vis foreign currencies.
It would do this by raising interest rates, making it more attractive for investors to hold their investments in dollars, as higher interest rates pay larger returns to foreign or domestic lenders. Ie, the countries with the highest interest rates will have the most highly valued currencies.
Higher interest rates are sometimes necessary to reduce inflation; however they also contract the economy and can cause recession. The Fed could certainly stregthen the dollar if they wanted to; to do so may risk a recession.
A less highly valued dollar will also benefit our exports; lower interest rates help businesses, consumers, and the stock market but may, over time, cause inflation.
(The other postings discuss stuff that isn’t really relevant to any sort of economic discussion.)
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