Transcripts of the monetary policymaking body of the Federal Reserve from 2002–2008.

Yes. But I’m looking at a scenario that would have a net positive shock to the global economy so that it’s not that our incomes in the future are likely to be lower but that foreign incomes appear likely to be higher. Foreign assets look as if they should be valued more highly. The relative differential shows through to cause the dollar to fall, but on balance, it is a more favorable foreign outlook rather than a less favorable U.S. outlook that produces that effect. You’d get a very different story if the dollar were to fall for political reasons that could be driven by safe-haven concerns, which would tend to drive down U.S. long- term interest rates somewhat, as we saw in ’97 and ’98. Alternatively, the dollar could fall for anti-U.S. political reasons, and presumably people would then be selling U.S. bonds as well as U.S. dollars. So the mix is all over the map. The dollar itself is just a reflection of what that underlying shock might be, as would be the case with stock prices and with the long-term interest rate. We can arbitrarily put those shocks into the model and get out the answers, but basically we feel why bother the model? We could just write down the answers. That’s in essence what we’d be doing, so we’ve shied away from it.

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