Will the Fed devalue the dollar dramatically?
*Dow Theory Letters, Richard Russell, May 11, 2007
“If it is perceived that the US is on the edge of recession, I think we’ll see John Maynard Keynes’ theories go into high gear. I believe the Bernanke Fed would create fiat currency en masse. Interest rates would decline (they already are), and credit would be made widely available.
Without the discipline of gold, fiat paper can flood the planet, and if a recession even begins to show its face, I believe we will see literally an ocean of newly created fiat money. No nation today wants a strong currency. If a nation’s currency becomes too strong, its’ businessmen demand that the nation’s central bank bring down rates and devalue the currency. The pressure for “full employment” runs politics today. If you want to be elected, you must promise that you will produce full employment.
World War II production and full employment (including employment by women) got us out of the Great Depression. What will get us out of any oncoming recession? My answer is rising demand. To create rising demand, the government will want to put more money, cheaper money, more credit, into the hands of consumers. They’ll do it by manning the monetary pumps, creating new oceans of money. Plus easing credit conditions. Anything to avoid deflation and recession.”
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