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IPFS News Link • Central Banks/Banking

Central Bankers Gaslighting Us About the "Strong" Dollar


What explains this dichotomy?

In a nutshell, it's not so much that the dollar is "strong." It's just the cleanest dirty shirt in the laundry basket.

As Mises Institute senior editor Ryan McMaken put it, "The problem isn't that the dollar is 'too strong.' The problem is that other central banks are even worse and that the depreciation of other currencies is causing instability, lost wealth, and economic crises."

Naturally, countries with dirtier shirts would prefer that the US roll around in the mud a bit and get the dollar down to their levels. But McMaken argues that would be a mistake.

On February 8, the Japanese yen fell to a twenty-four-year low against the dollar, dropping to 143 yen per dollar. Not much has changed since then, with the yen hovering between 142 and 144 per dollar. In September 2021, one only needed 109 yen to buy a dollar.

Overall, the yen has dropped 21 percent against the dollar over the past year, yet Japan's central bank apparently has no plans to change course. Nor should we expect it to. Japan's debt load has become so immense that any attempt to raise interest rates or otherwise tighten monetary conditions would prove extraordinarily painful. So, it's no surprise the Bank of Japan (BOJ) is now positioned to become the last central bank clinging to negative interest rates.