Friday, July 20, 2007

Debating the Dollar

A big hat tip to Steve Conover over at The Skeptical Optimist blogsite for his kind words about Kudlow & Company. As Mr. Conover points out, we always strive to give both sides a fighting chance in the war of ideas...

Here's The Skeptical Optimist take on a big issue we've been covering recently on the show:

Interest Rates and the Dollar, July 2007

The dollar will supposedly collapse sometime soon, according to the bears. That's hogwash, according to the bulls. Both sides have plausible arguments (...and, by the way, getting to hear both sides of the argument on any given question is the main reason I like to catch Larry Kudlow's CNBC show, Kudlow & Company, whenever time permits—about twice a week; I can't remember the last time he didn't have both viewpoints represented by an expert on the topic at hand).

I still refuse to get into the game of predicting interest rates or the forex value of the dollar, so I'll just continue to keep a close eye on the indicators, and be content with my role as net judge at a ping pong match. (If I ever get good at predicting either of those, I'll shut this blog down and start trading futures.)

Anyway, a weaker dollar should in theory translate into higher long term interest rates, and so should higher inflation. But inflation is staying level at around 2.5% according to most measures; interest rates are moving sideways to slightly up; and although the trade-weighted dollar index is falling, it's still much higher than in previous decades. In short, dollar doomsday isn't on the radar yet.