(Bloomberg). Paulson, like his four predecessors, has stuck with former Treasury chief Robert E. Rubin's phrase that a ``strong'' dollar is in the U.S. interest. Officials repeated the phrase whether the dollar was rising or falling. Now, Paulson is under pressure from European policy makers to more forcefully defend the currency after it fell to a record low last week. That strategy may meet with limited success because the Federal Reserve is cutting interest rates, while banks in Europe and Asia are either tightening or keeping them unchanged. Moreover, words may carry little weight in a market that's swollen to $3.2 trillion a day.
Interest rates differentials do not drive currencies. A weak currency is not inflationary.
It is exactly the opposite. Rising inflation forces interest rates to move higher and is conducive to a weak currency.
Cut taxes and regulations and stop our wars and the dollar will strengthen. It is the only way to be accepted again by the international community.
The trend of a currency is the ultimate fever chart of a country.
More on http://www.peterdag.com/.
George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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