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SW Minnesota | I take a stab at the What if:
If Volker had said I am not going worry about the size of the money supply I am going to keep interest rates stable and if that .means the money supply goes up so be it.What might have happened is the following:
1)the dollar would have declined some because of domestic inflation. That isn't a big dean because it is happening now and has happened at various rates since the 80s.
2)The weaker dollar would have made it easier to export and harder to import. Sure this would have been good for American in the short term in the long term farms production could have exceeded demand but that would have been a softer landing that what we had. But more importantly the trade deficits would not have got so far out of wack. We would not have lost so much real industry and China would not be doing as well as they have. For example John Deere parts would be made here and not China.
3)Expensive imports might even have discouraged some consumption. In the end the dollar is getting pressured by two separate but related thing: One is government deficits that have been going on for over 80 years for the most part. Second the inability of this country to produce as much as it consumes. In my opinion what Volker did was prop up the dollar to get consumers some cheap goods for for a few years.
Ag was just a small part of the pain. | |
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Financial sector expansion.
