When the Federal Reserve messes with monetarty policy how does it affect international trrade and our domestic

Question

When the Federal Reserve starts the process of monetarty policy how does it affect international trrade and our domestic american economy? (The implementation of monetary policy)

Answer 1

Our payments abroad create a demand for foreign exchange (view as supply for dollars). Payments from foreigners to us create a supply of foreign exchange (view as demand for dollars).

A deficit in our balance of payments creates a demand for foreign exchange greater than the supply, leading to appreciation in the value of foreign exhchange. Alternatively, we could say that it leads to depreciation of the dollar.

When the US money depreciates, US exports should rise because our good become cheaper for foreigners, and our imports should fall because foreign goods become more expensive for Americans.

Answer 2

When the Federal Reserve monetize the debt (created by Congress' deficit spending), it purchases interest bearing Treasury bonds from the Treasury. These bonds are paid for by newly created federal reserve notes. The Federal Reserve creates these notes out of NOTHING! The Treasury now pays government obligations with these new federal reserve notes, thereby diluting the purchasing power of the FRN's already in circulation. This effect is called INFLATION.

Since the rest of the nations are using unbacked, fiat money, just like us, the exchange rate among various currencies is based on how much their respective governments have inflated their money supply.

The solution to inflation, and international trade dislocation, is a return to gold-backed money. Politicians resist this idea, because it would force them to either raise taxes to pay for their excesses, or reduce spending to the level of tax revenues. Banker (International Bankers) resist gold backed currency because they make their money by supplying and manipulating the economies to the nations of the world.

This was the system one hundred years ago. The world had stable money. Wars were much less frequent, and prosperity was producing our Golden Age. Today, we allow criminal politicians to fleece us, and we take inflation as a natural phenomenon, rather than what it is: STEALING.