It’s all Relative

Posted by on . 14 comments.

Your President, George W. Bush (7/2/08):

“We’re strong dollar people in this administration, and have always been for a strong dollar, and believe that the relative strengths of our economy will reflect that,” Bush told reporters at a news conference ahead of his trip to Japan for a meeting of the Group of Eight rich nations.

Is it really too much to ask for one of the people who considers him/herself a professional journalist to query the President on this matter? If they’re all “strong dollar people” and “have always been for a strong dollar” and American economic strength is reflected in exchange rates, the why does a seven year dollar chart look like a slow motion Pets.com?

Comments

  1. effay says:
    July 9, 2008 at 9:49 pm

    With all of the wild proclamations by the presidential candidates about how they will lower consumers fuel bill, I only see two realistic relatively quick-fixes:

    1) Get out of Iraq, which is inflating the currency
    2) Get rid of ethanol mandates and subsidies, which cause consumers to get lower gas mileage

  2. matt says:
    July 9, 2008 at 10:01 pm

    >Get out of Iraq, which is inflating the currency

    i thought you were a supply and demand guy…

  3. effay says:
    July 10, 2008 at 7:51 am

    That’s right. When you print money to pay for something you can’t afford (Iraq) it increases the supply of money which causes inflation.

    By the way, you once commented on one of your posts about the “absurd gaming of inflation statistics” (if I recall correctly) as evidence that inflation wasn’t playing any role in commodity price increases. But, you know, a lack of high inflation is evidence that the Bush administration’s deficit spending on the Iraq war (and everything else) isn’t negatively affecting the economy. You can either choose:

    1) Deficit spending (Iraq War) and the inflation it causes is hurting the economy and is playing a role in commodity price increases.

    or

    2) Deficit spending (Iraq War) and the inflation it causes is not really affecting the economy and commodity price increases have nothing to do with inflation.

    I choose 1)

  4. matt says:
    July 10, 2008 at 8:10 am

    the government is obviously gaming CPI. the things people buy cost more money. they are using hedonics to mask this.

    but money supply and credit are actually decreasing which means that we are experiencing deflation. no one is printing or lending.

    oil is up against all currencies, as are ag commodities.

  5. sarabeth says:
    July 10, 2008 at 8:18 am

    funny how anything and everything gets reduced to a choice of only two options.

  6. effay says:
    July 10, 2008 at 8:20 am

    “the things people buy cost more money.”

    I totally agree.

    “but money supply and credit are actually decreasing which means that we are experiencing deflation. no one is printing or lending.”

    What is your source? How can you say there is simultaneously inflation and deflation? That’s not possible. How is the government paying for Iraq and everything else if not by printing money?

    “oil is up against all currencies, as are ag commodities.”

    But oil’s up much more against the dollar than the euro.

  7. matt says:
    July 10, 2008 at 8:45 am

    >How can you say there is simultaneously inflation and deflation?

    i’m not. inflation doesn’t mean rising prices. and even if it did, only the price of goods and some services are even rising. wages are flat to falling.

    money supply isn’t rising any faster than before. treasury.gov has lots of pretty charts.

    iraq certainly isn’t helping, but as our war-supporting friends like to remind us, it’s a small portion of gdp.

    iraq and iran are adding risk premium to the price of oil for sure.

    >But oil’s up much more against the dollar than the euro.

    because they’re raising and we’re cutting rates. not the same as printing.

  8. Nogburt says:
    July 11, 2008 at 9:32 pm

    >money supply isn’t rising any faster than before.

    I think that you’re general point here is more or less correct for the mediate term. But unless they are going to stomach the political mess of bank failures and mortgage mayhem they’re going to have to print more money or invent or use some other exacerbating device.

    And one the straight up money supply side of things, judging by the Federal Reserve numbers the inflation is still pretty steady. federalreserve.gov/releases/ has several informative tables and charts of these tables are available on Wikipedia.

  9. matt says:
    July 11, 2008 at 9:53 pm

    this doesn’t look steady.

  10. Nogburt says:
    July 12, 2008 at 7:02 pm

    >”the entire economic system of the North Atlantic could tip into debt deflation over the next two years if the authorities misjudge the risk.”

    Notice the use of the word “could”.

  11. matt says:
    July 12, 2008 at 9:39 pm

    >Notice the use of the word “could”.

    what’s your point? i posted that because of the charts and the fact that serious people are now taking this seriously as a possibility. i didn’t say it was going to happen, just that it looks an awful lot like it already is.

    i don’t think the authorities even have much control. de-leveraging is deflationary, and all of the banks have to de-leverage. if banks can’t/don’t want to lend money, no one can make them, and even 0% interest won’t fix that. see: japan.

  12. Nogburt says:
    July 13, 2008 at 11:27 am

    Those charts primarily showed a slowing in the increase of the rate of inflation.

    >if banks can’t/don’t want to lend money, no one can make them, and even 0% interest won’t fix that.

    This is true right as the fractional reserve fiat system reaches its limit. But it isn’t very comforting to realize that the banking system stops responding to a broken thermometer just as soon as it breaks.

  13. matt says:
    July 13, 2008 at 12:33 pm

    >Those charts primarily showed a slowing in the increase of the rate of inflation.

    couple that with de-leveraging and unwillingness to lend. what does that spell?

  14. Nogburt says:
    July 13, 2008 at 7:11 pm

    >couple that with de-leveraging and unwillingness to lend. what does that spell?

    It spells a reduction in the increase of credit expansion.