"When Paul Volker declared several weeks ago that the world was in a 'dollar crisis,' his successors at the [Fed] made their private disapproval very clear. This week ... Bernanke raised the white flag over Mr. Volker's point by declaring his own public concern 'that the dollar remains a strong and stable currency.' ... The Fed has monopoly power over dollar creation, and concern for its value ought to go without saying. ... The question now is whether the Fed will follow up its new words with action. ... But the Fed chief signaled that he isn't about to tighten monetary policy any time soon because current 'policy seems well positioned to promote moderate growth and price stability over time.' ... The Fed-inspired commodity boom has sent food and energy prices soaring, while wage gains invariably lag. ... The Fed's dollar indifference has sent an inflation shock through those dollar-linked economies. This week alone, we''ve read about price riots in Vietnam, inflation hitting 10.1% in Kuwait, Abu Dhabi contemplatating price or wage controls, South Korean and Indonesian central bankers considering rate hikes, and the Chinese letting the yuan rise ever higher to curb inflationary pressure imported from the U.S. The result has been the largest decline in America's global economic influence since the 1970s. ... Changing the value of the dollar means reducing the supply of, or increasing the demand for, dollars", my emphasis, Editorial at the WSJ, 5 June 2008.
The Fed's assault on the dollar continues unabated. Anyone who believes in Fed "independence" should note the Fed is part of the Bush adminstration. The Fed has "no choice but to talk tough". Got gold? Get more. Rogoff is apparently another economist who doesn't read the newspapers. Hey Rogoff, did you notice the recent prices of: wheat, corn, soybeans, copper, oil, gold, silver, platinum, nickel, lead, iron ore, zinc and natural gas? See my 21 November 2007 post.
Poor Harvard kids, having to hear this nonsense. As for "inflation", it's whatever number Uncle Sam wants it to be. "Productivity" is a residual, less inflation, more productivity.