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The Fed Might Have Painted Itself into a Corner

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  • Sat, Jun 13, 2009 - 01:59am

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    investorzzo

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    The Fed Might Have Painted Itself into a Corner

A growing concern for Fed policy makers is a weakening in the US dollar against major currencies. The price of the euro in US-dollar terms climbed from a low of $1.27 in November last year to around $1.41 in May and $1.43 in early June — an increase of 12.6% from November. The major currencies dollar index fell to 78.89 in May from 82.3 in April — a fall of 4.1%. If the declining trend in the US dollar were to consolidate, this could cause foreign holders of US-dollar assets to divest into non-dollar-denominated assets and precious metals. This in turn could spark another financial crisis.

http://mises.org/story/3518

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