The Six Percent Solution

Bernanke made a little remark that is receiving little attention, although it should. He said that the trade deficit the US has with the rest of the world could be corrected by a six percent drop in the value of the dollar. He wasn't advocating that drop, but assured America that if it did happen, not to worry. Our economy was strong enough to handle it.

In what sense, Econo-Girl asks. Since much of consumer goods are imported, it means that the price of imported goods would rise six percent, right off the bat. And that assumes no escalating in the price rise as retailers fear a continutation of that rise and their prices go up to meet the level of their fear.

And what effect would a sudden rise in prices have on your personal economy? So what is he talking about? He is the Fed Chief. He knows that prices will rise for everyone if the dollar drops in value to that extent. Does he think most people will take that in stride?


The Lazy Iguana said...

He is part of the new fuedal system - where the rich own everything and would like nothing more than to have the middle class vanish. That way they can return to the system where they are the lords and everyone else is a serf.

People like the new fed chief would not have a problem if the price of everything rose by 6% or even 10%. They forget that millions of Americans are living paycheck to paycheck.

Anonymous said...

Well. Why should he be worried about the Americans living paycheck to paycheck? This may sound mean, but his job is to control the economy. His reason not to do it, then, would be the poverty it would sink some into. Cite that as a reason, not merely because millions are living paycheck to paycheck.

The Lazy Iguana said...

To hell with the economy. It will all mean nothing if the middle class suddenly realizes "holy crap! I can not afford to pay $5,000 for a television!".

Revolutions usually begin when people are hungry. Right now the USA is fairly safe from such a thing, as the standard of living here is rather high.

The problem is that as the gap between the richest and the poorest grows - and the middle class shrinks - people will realize that their standard of living is going down. This is how things begin.

Econo-Girl said...

Iggy, you are predicting the future.