[Borodog]

[ QUOTE ]
Forsooth, Borodog, forsooth. It really makes you wonder why the Federal Reserve had been hiking interest rates in a recessionary period (making it harder to borrow against real goods), why the dollar-yen exchange rate was at historic lows till February of this year, and the Gulf Nations have been committed to dollar peg since the '90s. It only makes sense that foreign private investors, with no responsibility or allegiance to the United States government, would continue to buy and peg to a depreciating currency.

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I suppose this is supposed to be sarcasm. No, it doesn't make me wonder why the Fed was hiking interest rates in a recessionary period, since that is what one has to do to avoid hyperinflation. It's not like the Fed increased the target with the purpose of increasing interest rates, either. It's that the market increased the rates and the Fed either had to (a) up the target to not look foolish, or (b) pump more and more money in to try and maintain the lower target. For a while there they chose the former route, but with the recession becoming more and more obvious, they have chosen the latter; lower the target and pump money like mad to paper it over through the end of the administration. I doubt they will make it.

Your $-yen ex. rate point makes little sense to me. I don't have data past 5 years back at my fingertips, but it looks like the low in the $-yen ex. rate was in late 2004. I'm not sure how a single exchange rate would negate my point about the general international weakness of the dollar, which I don't see as being disputable, especially versus the yen of all currencies, seeing as Japanese monetary policy has been FUBAR for the better part of twenty years.

I also don't understand your point about "private investors, with no responsibility or allegience to the United States government, would continue to buy and peg to a depreciating currency." A) private investors don't do the pegging, foreign governments and central banks do, and they do have some responsibility and allegiance to the US government, at least when it comes to monetary policy. And B) the currency didn't start to rapidly depreciate until recently, and lo and behold, those vary nations are either dropping or threatening to drop their pegs left and right around the world.

So, I don't get your point.