...If I corrected everything wrong with the comments in this thread...
It would look like this:
** read this part, if you understand it you will be able to start having a reasonable discussion about this issue**
Every time we have a deficeit we weaken the dollar.
...when that deficit is not matched with an equal or greater reduction in the velocity of money.
A dollar isn't worth 1$; a dollar in the economy is worth as much yearly economic activity as times that dollar changes hands. As such, if people spend the money less, because they are saving or unemployed, then the total economic activity drops, this makes dollars more scarce and increases their value (deflation/strengthening). If the government steps in and adds as many newly-minted dollars worth of activity to the economy, annually, as was removed then we have stagnation and not deflation.
The problem comes when the savers become spenders again, as we won't keep up our same rates of spending-reductions forever, and the velocity of money in the private sector warms up. Either the government must cut back the public sector with spending cuts, the private sector with taxation or the private sector with interest-rate hikes; If it doesn't do this then we will have inflation in prices to bring down the value of everyone's purchasing power to match the amount of purchasing power taken by the expanded government.
** the above was good to know and understand if you want to know and understand how the economy actually works**
What do you think would happen if the FED decided to RAISE rates for once
It has done this many times and will again when inflation starts to hurt employment. The role of the fed is to encourage employment first and control inflation second, both with the end-goal of reducing the impact of the natural recession/boom cycle.
Might this show to the world that we care about our currency?
The value of everything is determined by supply and demand. Increasing interest rates would mean reducing the supply of the dollar; this would also mean that it would hurt jobs, as fewer dollars => less employment (of all resources, including labor).
Or perhaps even give us all a confidence boost that we may be turning a corner?
reducing employment is not the way to boost anyone's confidence.
The problems will occur when people start spending money faster; this will lead to a greater velocity of the already present dollars which will only be reigned in by spending cuts, tax hikes and/or interest rate hikes.
It is the turning of the corner that will signal the need for higher interest rates.
Because the whole of the liberal's fiscal policy is based upon the availability of cheap credit, and liberals currently dominate both parties. No one in the gubment wants to see cheap money go away.
The 'gubment' spends and doesn't tax for what it spends, this directly hurts the private sector and thus private sector job growth. This is not a liberal but an anti-market move that both parties are party to. That said, the only benefit 'liberals' would get from an increase in interest rates is greater unemployment and thus greater dependency on the government.
I thought that the feds want to devalue our currency to help with exports, reduce labor cost (minimum wage stays the same, but currency is worth less) and to reduce effective debt.
This also has the effect of increasing the price of imported goods (see oil) and pushing people into higher tax-brackets. Minimum wage is a joke, only the poor/rural portions of the country are truly hit by it, everywhere else the market for labor has a full-time job valued above minimum wage.
Within the USA, a Dollar is still a Dollar so long as Inflation is kept under control.
You have forgotten about required imports (see oil) and goods that go up based on exchange rate and lead to sales and employment generally going down (see oil).
Outside the USA, a "cheap" Dollar helps make American Exports more attractive since it takes less local currency to buy US when the Dollar is cheap.
What exports do we have that any amount of devaluation of the dollar have us match china?
ultimately a US Dollar is only currency within the USA, so whatever dollars go out must eventually come back.
What does this mean? Do you mean that there is a local-economy velocity to the dollars in circulation outside of the US? What is the point of the statement?
What world do you live in where it's important to show if you "care" about your currency?
One where inflation-spirals destroy governments.
Once you've rebounded a little bit you can ease the dollar back up so imports aren't as expensive to your households.
This kind of thinking worked very well in the great depression... to extend the depression years longer than it had to go; Exports are not going to jump, protectionist policy and currency devaluation doesn't work with an economy that is tied to oil.
have had a "strong dollar policy" for almost 100 years.
meaningless jiberish, (not from you, but from whoever spouts this highly ambiguous phrase)
Specifically why do you think the currency valuation didn't do much over the last 6 years
The long-term effects of economic activity such as GWB and BHO's excessive spending will be felt um.. right now... when employment doesn't pull out of a recession like we're supposed to. Once we do re-bound we're going to have a hell of a interest-rate headache after the dollar-creation bender we just went on.
That said, in the short term, the fed has done a very reasonable job.
What should our currency valuation be in your opinion?
Just what it is, the fed has done a great job and they are doing the best any humans can in this sort of situation. It is the lack of investment in private-sector jobs on the part of congress that's created the problem.
As a bonus to P&N, please answer why you think those answers are the ideal answers.
Because private-sector jobs beget private sector jobs and an increase in the utilization of resources (including human resources); public sector jobs hurt the kind of innovation needed to help our employment rebound. By private sector I mean anything that can fail for not being as innovative as it should be, this discounts the public-sector bank, mortgage and financial market companies that pretend to be private sector.
Every time we have a deficeit we weaken the dollar.
...when that deficit is not matched with an equal or greater reduction in the velocity of money.
A dollar isn't worth 1$; a dollar in the economy is worth as much yearly economic activity as times that dollar changes hands. As such, if people spend the money they have less, because they are saving, for example then the total economic activity drops, this makes dollars more scarce and increases their value (deflation/strengthening). If the government steps in and adds as many newly-minted dollars worth of activity to the economy, annually, as was removed then we have stagnation and not deflation.
The problem comes when the savers become spenders again, as we won't keep up our same rates of savings forever, and the velocity of money in the private sector warms up. Either the government must cut back the public sector with spending cuts, the private sector with taxation or the private sector with interest-rate hikes; If it doesn't do this then we will have inflation in prices to bring down the value of everyone's purchasing power to match the amount of purchasing power taken by the expanded government.
Look at what happened when China raised rates 0.25% last week.
what the Chinese do is poorly associated with how similar actions will impact the US; what the Australians do, on the other hand, might just be a good indicator of proper policy.
Also someone has to pay the increased interest payment on the debt and that someone is you!
interest on debt is irrelevant to how the macro-economy works unless we get to a point where not paying our interest becomes a possibility.
Every time we lower the prime lending rate for banks they in turn should lower the rate on credit cards.
The formula that links the two is your right not to own a credit card unless it gives you the rates you want! If you are such a low credit-risk why not re-finance those credit cards at the new lower-price?
Halik, your icon upsets me to no end; brencat, you didn't get enough ram for your new rig. (this is all that is out-right wrong with your posts)
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