Mr. Dollar, The good old days are gone, perhaps forever

Re: # 9: Hee hee, Peemax is pissed! He does not understand that PCE itself is not what the Fed focuses on, rather it is core inflation (as measured by Core PCE, among other measures) that matters.

Well Peemax, I guess you can eat crow tonight!

#8 by ejazharoon,

Moron ... everyone focuses on core inflation which is a generic term but using what measure? In case of the US Federal Reserve it is Personal Consumption Expenditure (PCE) Deflator which is a variable basket of items which changes constantly with shifts in consumption patterns.

Don`t argue about things you know nothing about .... idiot.

Re: # 7: Hmmm, the Fed actually does focus on core inflation. As the Fed statement on June 29th said: ``Readings on core inflation have been elevated in recent months``. The Fed prefers core PCE over core CPI, although core inflation is not the only determinant of its policy.

Then again I have not read the news over the weekend, perhaps Bush appointed Peemax the Fed chief, in which case we can expect a global financial meltdown next week!

The emphasis on core inflation numbers is misplaced. The Fed has long abandoned this indicator in its monetary policy decisions in favour of what they call a PCE Deflator.

As for the dollar, it doesn`t matter for Americans (domestically) whether it goes up or down. In both cases, it is the foreigners who get screwed ...

europe is headed for unprecedented turmoil...the euro is a khokhla currency with no real fundamentals in productivity, ridiculous pension plans, and it will increase unemployement ..only immigration is from poorly trained north africa creating an underclass.

so sure, dollar is devaluating, but that does not correlate to poor quality of life for americans..they are lean-mean competative workforce and a strong vibrant and innovative economy creating iphones.

Re: # 4: I meant to type inflation not nominal inflation in the last paragraph.

Good points. The US government does calculate a whole host of inflation measures that include food and fuel such as CPI, PPI and implicit price deflator. However the Fed and most analysts focus on core inflation numbers that exclude food and fuel. Most inflation numbers published by the government have problems, for instance the CPI does not include actual rents but rather uses imputed rent, which is lower when interest rates are low, and this has caused some downward bias in the recent past.

Also, the historic correlation between currency depreciation and nominal inflation has not held in the recent past, for instance the Japanese Yen has depreciated mightily even though Japan has very low inflation. There are other factors (such as the carry trade and flow of funds) that seem to have been more dominant in the recent past.

The dollar devaluation is just a strategy to get rid of cheap Chinese goods from the US market. Also, it could be the new global war where finance and currency is weapon of choice. Following on the anti-China rhetoric in the US, along with the recent US consumer backlash against the quality of Chinese product would only suggest that the new US weapon of choice is dollar. Bring the value of dollar down such that Chinese products are no longer cheaper than locally produced products.

Another angle is to continue railing against the quality of the Chinese products and product liability law suits against the wholesalers who advance Chinese product in the US. This should literally scare the Chinese in raising the standards and quality of their products.

Finally, encouraging alternative sources of energy and thus reducing the petro-dollar influence on the US economy.

FCUK ... just lost a long post...

Until L8er...

Good old days for the Dollar ended in 1985 once the then Treasury Secty Jim Baker signe d the Plaza accord.

Recent sell off in US Dollar has been against Euro based currencies, Japanese Yen has remained flat to slightly weaker.