This is pathetic.
Dude needs to learn to speak in Greenspan-esque "Economese" when he doesn't know the answer to a question... Use some jargon, be long-winded, be boring, get a thick pair of glasses, be an economist!!!
For the record, I do not think the currency swaps in question -- half a trillion dollars to foreign central banks -- was what caused the US nominal dollar exchange rate to "appreciate". In the past year, dollar appreciations have been perfectly correlated with declines in the Dow, the seizing up of financial markets, and a diminishing in investor appetite for risk. The Fed's actions were almost certainly in response to this. What happened was, banks all over the world suddenly want to hold either T-bills or dollars, taking as little risk as possible, and not wanting to hold riskier assets such as the Pound or Euro. Everyone wants this at the same time, so to alleviate the demand, the Fed gives other countries half a trill in dollars in return for half a trill in their currencies... This, if anything, should slow the appreciation of the dollar, which is a good thing.
I cannot fathom why Bernanke could not just elucidate this, except to say that perhaps Bernanke is taking his marching orders from someone else and doesn't himself quite understand the rationale...
Paul Krugman: Cruelty, Incompetence and Lies
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