Despite what some lying FOMC sack of fecal matter said on TV recently, it turns out the Fed was not only fully aware QE2 would crush the dollar, but welcomed it.
"Several participants argued that the stimulus provided by additional securities purchases would help protect against further disinflation and the small probability that the U.S. economy could fall into persistent deflation—an outcome that they thought would be very costly. Some participants, however, anticipated that additional purchases of longer-term securities would have only a limited effect on the pace of the recovery; they judged that the economy’s slow growth largely reflected the effects of factors that were not likely to respond to additional monetary policy stimulus and thought that additional action would be warranted only if the outlook worsened and the odds of deflation increased materially. Some participants noted concerns that additional expansion of the Federal Reserve’s balance sheet could put unwanted downward pressure on the dollar’s value in foreign exchange markets. Several participants saw a risk that a further increase in the size of the Federal Reserve’s asset portfolio, with an accompanying increase in the supply of excess reserves and in the monetary base, could cause an undesirably large increase in inflation."
"Participants also differed in their assessments of the likely benefits and costs associated with a program of purchasing additional longer-term securities in an effort to provide additional monetary stimulus, though most saw the benefits as exceeding the costs in current circumstances. Most participants judged that a program of purchasing additional longer-term securities would put downward pressure on longer-term interest rates and boost asset prices; some observed that it could also lead to a reduction in the foreign exchange value of the dollar. Most expected these changes in financial conditions to help promote a somewhat stronger recovery in output and employment while also helping return inflation, over time, to levels consistent with the Committee’s mandate."
We hope the middle class enjoys its daily KY stretching exercises by its Marriner Eccles feudal overlords.
Elsewhere the despots lowered their 2011 GDP target from a range of 2.9 to 4.5 to 2.5 to 4.0 (and 2010 to 2.3 to 2.5). Bill Gross knew this in September. To wit: "Our understanding is that the Fed is about to downgrade their forecast from 3% down to 2%." Can we please get in on whatever expert network PIMCO uses? We promise to expense it to US taxpayers as well.