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Friday, March 24, 2006

Bernanke Shrugs Off a Potential Decline in the Dollar

Ben Bernanke is relatively unconcerned about the potential economic consequences of a falling dollar:

Bernanke Says Dollar Risk From Less Capital Not 'Worrisome', Bloomberg: Federal Reserve Chairman Ben S. Bernanke said a possible decline in the dollar because of less foreign investment wouldn't have a "worrisome" effect on the U.S. economy. Bernanke said it isn't clear that faster economic growth in emerging markets would cause investors to shift capital to those countries and away from the U.S. Should that happen, "it might be associated with a decline in the value of the dollar and a narrowing of the U.S. trade deficit," Bernanke wrote in a March 21 letter to Representative Harold Ford Jr... Neither of those events, though, "would be likely to threaten U.S. growth or boost inflation and interest rates to a worrisome extent."... Bernanke told another lawmaker this week, Democratic Representative Brad Sherman of California, that the trade deficit needn't cause a "precipitous decline" in the dollar's value, though the "possibility of a future disruptive correction of the U.S. trade deficit cannot be ruled out."

There's more in the letter to Representative Sherman concerning Bernanke's opposition to allowing non-financial companies to perform banking functions, something Wal-Mart has applied to do:

Bernanke: Economy can handle dollar drop, CNN/Money/Reuters: ...In the letter, Bernanke also restated the Fed's position that Congress should review an exemption that allows commercial firms to acquire industrials banks, warning that decisions on the issue could have "important ramifications" for the U.S. economy. ... Wal-Mart Stores ... has applied to open an industrial bank in Utah, an application under review by the Federal Deposit Insurance Corp. ... In a news release, Sherman said the statement "clearly urges Congress to prevent regulators from mixing banking and commerce."

    Posted by on Friday, March 24, 2006 at 12:15 AM in Economics, International Finance, Monetary Policy | Permalink  TrackBack (0)  Comments (4)


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