Yesterday I wrote about the US economy, with particular mention of the weakness of the dollar. Karl Denninger has pointed out that this is a deliberate policy, not an accident.
Well, whaddaya know? Not 24 hours later, Bernanke speaks about that very subject. Guess what he said?
The Federal Reserve is monitoring currency markets “closely” and will conduct policy in a way that will “help ensure that the dollar is strong”, Ben Bernanke said on Monday in rare comments on the US currency.
In remarks apparently aimed at reassuring markets and foreign governments that the central bank is not indifferent to the fate of the US currency, the Fed chairman said “we are attentive to the implications of changes in the value of the dollar”.
He added that the Fed “will continue to formulate policy to guard against risks to our dual mandate to foster both maximum employment and price stability” – and that in doing so it would support the value of the currency.
The dollar briefly jumped on his remarks, but then gave up some gains as traders questioned whether Mr Bernanke was prepared to go beyond talking in support of the currency.
For the Fed chairman to comment on currencies at all is highly unusual. By convention, the US Treasury Secretary is the sole US official who talks about the dollar.
Mr Bernanke’s comments came amid growing international unease about the weakness in the dollar, the global reserve currency, which forms a backdrop to President Barack Obama’s tour of Asia.
Liu Mingkang, China’s banking regulator, criticised the Fed at the weekend for fuelling the dollar carry trade in which investors borrow dollars at ultra-low interest rates and invest in higher-yielding assets abroad, creating the risk of new asset price bubbles.
. . .
The Fed chairman characterised the recent decline in the dollar as the unwinding of the gains made at the peak of the crisis when investors worldwide took refuge in the US currency, but said the Fed was watching developments closely – and cited the dollar as part of the inflation outlook.
There's more at the link. If you're at all interested in or involved in economic planning, it's worth reading the whole thing.
To repeat the old saw:
Q: "How do you know when a politician is lying?"
A: "His lips are moving."
Bernanke may not be a politician per se, but his job is a political appointment, and he's answerable to politicians (and, of course, to his buddies in the big banks and investment firms). Enough said.
If you believe his latest pronouncements, there's this bridge in Brooklyn, NYC that I'd like to sell you. Cash only, please, and in small bills.