Dean (Zhuiyang) Chen

Source: Federal Reserve Bank of Minneapolis

Headline on yahoo finance today:

http://biz.yahoo.com/ap/071107/wall_street.html

This has been no doubt one of the most discussed topics regarding our economy and is usually looked upon as a negative. Keep in mind that the feds do have the power to influence exchange rates, if they chose to put positive pressure on the exchange rate all they would have to do is decrease supply of the dollar on the world market. I believe the feds may be purposely lowering the value of the dollar. Here's why:

• Weaker dollar = More exports and less imports since US goods will be cheaper to foreign nations and foreign good is more expensive to the US. Which alieviate our trade deficit problem with China, which was exactly the case shown by the AP news report released just a few months ago. http://biz.yahoo.com/ap/071011/economy.html
• There will be pressure on the interest rates to fall, from the increased money supply of the change in imports and exports but more importantly the fact that it gives the impression that the US market is doing badly giving the feds an excuse to lower the interest rate which is always great for the economy in the short run.