The Dollar and the Credit Crunch

``The Fed responds to the credit crunch by cutting interest rates, which would be the seemingly correct textbook strategy if the economy were closed and the foreign exchanges could be ignored. But the economy is open, and capital flies out of the country. Because of the unique position of the U.S. at the center of the world dollar standard, the drain of Treasurys -- the prime collateral in impacted credit markets -- exacerbates the credit crunch, and monetary expansion abroad worsens world-wide inflation. The Fed then further expands in response to the tightening of U.S. credit markets.'' -- Best op-ed I have ever seen in the WSJ.