I have been warning for some time that the US dollar, and the US economy is in a bad position because we are increasingly in a position where rate cuts can cause the US dollar to plummet, and while this may be good in the long term, it would move toward restoring the balance of trade, in the short term it leaves US policy makers with the choice between inflation and recession, and that the net result would probably involve both.^*

Well, we now have a central banker at the European Central Bank, Lorenzo Bini-Smaghi, saying the same thing, when he, “warned that the tumbling dollar may now start to foreclose the option of US rate cuts and force the Fed to keep monetary policy tighter than it would like.”

The ECB is acknowledging that the Emperor has no clothes. While it seems mild, it’s actually a very strong statement, and it’s not the individual statement of one person. They don’t freelance that way.

^*See here, here, here, here, here, here, here, here, here, here, and here, with the last link being just as I started the blog, but I’ve been posting about this on a private BBS for about 6 years.