[Zygote]

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... there are circumstances that can exist where the "printing of money by the fed" doesn't devalue the dollar.

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I really don't understand how, all else equal, expanding the money supply doesn't devalue the dollar.

I could understand that you might see a situation where the money supply is expanded but less than the market was expecting and the dollar rallies. Also if another country expands its money supply more than we do then our currency should increase in value relative to theirs.

Again, if you were to control for other factors, shouldn't expanding the money supply always lead to a devaluing of the dollar?

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i was using that to explain more clearly why the poker example was bad.

here is the intial statement i responded to:

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When we lower interest rates, the value of the currency goes down, because more money is printed. Right?

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i pointed out that the currency goes down b/c of interest rate diffs. interest rate diffs, assuming it is the US;s thats falling, come from the fed releasing more money (increasing money supply). it is just the clearer way to think about it.

that statement was likely read without understanding the distinction which is why i spoke up in the BFI thread.

we can all clearly agree that when the fed has a low interest rate bias (which it has exhibited for a long time), the value of the dollar, all else equal, will decline relative to its trading partners.

i simply want to make sure we all understand both WHY and WHY NOT. that understanding seems slightly lacking which, again, is why i chimed in.

Barron

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A currency's value is not simply measured by its exchange rate with other fiat money.

A currency's value is determined by what it can purchase across the board.