How can the Fed defend the dollar (stop its decline or cause appreciation) and also stimulate investment?

Question

Can it achieve both of these goals simultaneously through monetary policy?

Answer 1

By getting tough and forcing Business to do its own training and
insuring and fair disclosure; shape up. Quit "fixing" them with
our money. It doesn't work. Recognize this as the United
STATES of America and send aid without conditions/strings/
qualifiers so critical areas (like training, health, schools) can
get funded without deadwood crooked distributers draining
it down to miniscule amounts. Also...
Break up monoplies like the media and gas cos. that fix prices and force consumers to go elsewhere.

Answer 2

doubtful to NO.

investment is stimulated when either the cost of capital is lowered, or the returns are raised. Monetary policy can lower the cost of capital by lowering interest rates ... HOWEVER, this would tend to reduce the value of the dollar.

much of what stimulates investment is beyond the control of the Federal Reserve and in the hands of Congress. Some examples of possible laws that would stimulate investment are:

eliminate corporate income taxes
lower capital gains taxes
lower or eliminate taxes on dividends
speed depreciation deductions on fixed assets

pass tort reform at the Federal level
reduce the volume of Federal regulations by 50% or more
reduce Federal non-military spending by 25%
repeal the Davis-Bacon Act

oddly, any of these Congressional actions would likely help defend the value of the dollar by stimulating an inflow of capital looking for the opportunity to be put to work. they would likely increase employment, or wages, or both, as well.


I think I'd better like the chances of the paper-mache dog who is chasing the asbestos cat in H... over Congress passing any of these measures though. :-)