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Home Publications Blogs Beat the Press Which Way Is Up: Complete Nonsense on Economics and the Dollar in the NYT

Which Way Is Up: Complete Nonsense on Economics and the Dollar in the NYT

Tuesday, 09 November 2010 05:46

Don't turn up the heat, it's too cold! That seems to be the message from the rest of the world about the decline in the dollar that might result from the latest round of quantitative easing QE by the Fed.

The NYT told readers that:

"The Fed’s action, by lowering American interest rates, can also cause money to flood into other countries as investors seekhigher [sic] returns — which can threaten to overheat those countries’ economies."

Okay, here we have a statement from the NYT that QE is bad because it will lower interest rates in other countries and cause their economies to grow more rapidly. But, elsewhere we are told that the problem with QE is that it will lower the dollar which will make U.S. goods more competitive internationally. This will reduce the exports of developing countries and slow their growth.

So, other countries are mad about QE because it can both cause their economy to overheat and also because it will slow growth. Let's see, QE will make these countries both grow too fast and too slow. Now that's a really bad policy.

Comments (7)Add Comment
Baker Plays with Danger that Could Cause a Bubble and Recession
written by izzatzo, November 09, 2010 6:43
That's real cute. Have you no shame Mr Whose Your Nanny, claiming the flight of dollars from the USA to other countries does no harm either way, increasing their growth or reducing the value of the dollar to allow them to buy more of our exports.

Do you realize what could happen? There could be massive outsourcing of jobs. There could be massive gaming of our currency to prevent the dollar from falling and they could just save the difference rather than buy USA exports. There could be a massive housing bubble that finances our consumption of their exports. There could be massive unemployment if the bubble burst.

Have you even heard of the Great Depression Mr Nanny? Well that's what your playing with here, economic fire. Trillions in lost output, wealth and employment are at stake here that keep America strong, and you mock it like a choice between turning the heat up or down. Shame.
What countries are worried abuot
written by a, November 09, 2010 7:20
Other countries are worried that: hot money from QE2 will go into their asset markets (where yields are higher) and raise asset prices; and will lower the dollar and make selling their goods less competitive. I.e. other countries are worried that QE2 will export to them the American model of a weak real economy overwhelmed by a bubble asset market. Given how the waltz ended in the U.S., I can understand their concerns, and it perhaps warrants more than the typical American response of, "It's our money and your problem."
written by Paul, November 09, 2010 10:04
Other countries are angry that the U.S. can unilaterally project its financial power throughout the world economy, just as it can project its military power anywhere.

Other countries are angry that they weren't "consulted" and can do nothing to stop the Fed from impacting them. But they are generally bereft of ideas, so consulting them is meaningless.
written by reason, November 09, 2010 11:45
Can we have better commenters here. Dean is just suggesting that (the relatively small) US quantitive easing (its all that the Fed can do) has an indeterminate effect on other economies. Their concerns are perhaps a result of that uncertainty - but it definitely suggests that a co-ordinated approach would be better.
written by diesel, November 09, 2010 2:38
This is off topic, but it does relate to a NYT column by our perennial whipping boy, David Brooks and his latest offering "The Crossroads Nation"?

Why does Brooks always paint a picture of a future America that is attractive to outsiders eager to come here, do their creative thing and make a lot of dough in the process?

Don't his columns contain the tacit premise that America in its present incarnation fails to nurture sufficient talent to build the dream economy/state he envisions? This raises the question; why would someone be attracted to live in a place that fails to nurture its talent? And the answer is money. They come here to get rich.

And this is exactly what is wrong with America. Greed is not a sin because it's "dirty". The Church is more sophisticated than that. Greed is a sin because a life spent accumulating money is a life not fully lived. It squanders a divine gift. Liberals sense this. This is why liberals advocate moral values, while conservatives oppose them.
written by Calgacus, November 09, 2010 4:46
Very easy to understand. We must move forward, not backward. Upward not forward. And always twirling, twirling, twirling towards freedom.
dole really WAS an alien
written by frankenduf, November 10, 2010 9:20
nice one calgacus- another hilarious insight from that one was at the end, where he takes false pride and proclaims 'I voted for krang!', then gets whipped anyway- that one was very insightful- indeed anyone who voted for obama realizes that we're all screwed either way

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.