Of course you realize, this means war!  

There is nothing funnier or more Earth-shakingly serious than when Central Bankers square off against each other but, as I have been saying, 74 on the dollar index is a line that the rest of the World does not see us want to cross as the other 19 Central Bankers that make up the G20 begin to push back against Crazy Bennie’s printing press.

The first shot across the bow was fired in last month’s G7 emergency session on the Yen and that got the US to behave for a whole week before the Lords of the Fed went back to their weak dollar chanting.  Now Trichet is practicing a little counter-rhetoric of his own, breaking a general taboo amongst Central Bankers – commenting on US currency and indicating he will soften his own stance on the Euro to counter Bernanke’s printing press. 

This is how the hyper-inflation war begins, with each Central Bank cranking up their printing presses to (in this case) create more Euros with which they will buy the Dollars that The Bernanke prints to keep the Dollar strong against the Euro to maintain their trade balance and we already know the BOJ is cranking up the presses but they simply can’t swim upstream against the dual flow of Dollars that is coming out of the Treasury at a rate of $140Bn a month (our increasing debt) and the Fed at a rate of another $120Bn a month.  

The Dollars aren’t all new as the Fed uses their newly printed money to buy the Treasury’s newly printed debt (and $56Bn is on sale in the next 3 days alone!).  “I don’t take it lightly that Trichet is talking about the dollar rather than the euro. European policy-makers became alarmed when the euro rose above $1.45 in 2007 and they started to rein in the dollar’s fall,” said Minori Uchida, a senior analyst at the Bank of Tokyo-Mitsubishi UFJ, adding that the world’s policy-makers are increasingly worried about the dollar’s fall.  “I wouldn’t be surprised if there were international moves (to stem the dollar’s fall),” he added.   

No wonder people are plowing into metals (and see yesterday’s morning post for tips on setting up your own 450% upside play on gold) 

 

IN PROGRESS