Well, Hallelujah! The Fed has finally acknowledged the inherent problem that all fiat currencies face. In the absence of a "Gold Standard", all we have are little pieces of paper with ink on them, that people exchange for goods, and hope that they retain some type of value. Unfortunately, they are only little pieces of paper and they have to be backed by the Government that issues them. If investors lose confidence in that Government, the value of those pieces of paper falls. The Government then raises interest rates to attract interest back to their currency. This accounts for the risk premium inherent in owning U.S. Dollars. Did someone say inflation? I perceive this as one of many warnings from the Fed about what lies ahead.
DALLAS, April 11 (Reuters) - The Federal Reserve will do what it takes to maintain its credibility, which is central to preserving the integrity of the U.S. dollar, Dallas Federal Reserve Bank President Richard Fisher said on Tuesday.
Alluding to the Fed's dual role of ensuring inflation doesn't "raise its ugly head" while still promoting the fastest possible noninflationary growth, Fisher said, "We seek to get it right. And the answer to your question is we will do what gets it right."
Answering audience questions after a speech to the Dallas Friday Group, Fisher said the U.S. dollar is a "faith-based currency" dependent on the credibility of a central bank.
"In addition to a faith-based currency, we are the currency of the world and we must maintain its integrity. As far as my involvement is concerned, I will spend every ounce of energy doing that. I have no doubt that my colleagues will do exactly the same," Fisher said.
