Since June 7th, 2010 the U.S. Dollar Index has declined by more than 12.0 percent. This means that everyone that uses this currency has seen their purchasing power diminish substantially. Please realize when the U.S. Dollar index declines the stock markets around the world will inflate and trade higher. The declining U.S. Dollar Index has been the catalyst for the stock markets trading higher since the 2008 financial collapse. The plan by most central banks and governments has been to simply inflate the stock markets back to health. The question now that many people must ask is if this is the right medicine for the sickness? After all it is this same remedy of induced inflation that has caused this problem in the first place.
When the U.S. Dollar declines the users of the dollar will have to pay more for gasoline, heating oil, food, and most commodities. This is a direct tax on the U.S. consumer when most of the necessities of life go higher in price. Can the already strapped U.S. consumer withstand these price hikes at this time? Remember this is a time when many people are unemployed and smothered in debt. The foreclosure problem does not seem to have any end in sight and may linger on even longer after the recent robot signing scam that was done by the major banks. Please remember that one out of every seven Americans are now receiving assistance from the government which is not a sign of recovery. Who is really benefiting from this weaker dollar?
Gold has been surging since March 2009 when the stock market made a low. Gold is telling us that money is being created and thrown at the stock market in order to inflate it right back. Gold is now the worlds reserve currency. When gold goes up with the stock market it is telling us that investors around the world have lost faith in the fiat currencies around the world. The only way that gold will really decline is if the stock market goes into a deflationary tailspin much like it did in 2008 when the stock market crashed. Even at that time gold still held up better than the stock market did. Do the people at the Federal Reserve see this? Are they not mathematicians, statisticians, Ph D’s, MB A’s, and any other title that you can think of. Yet, they cannot see any of these problems emerging and just play stupid when everything hits the fan. ‘Joe the plummer’ could have see most of these problems coming. Now the Fed is starting to create new bigger problem.
In life people are supposed to learn from their mistakes and not try to make those mistakes over. However, the same tricks have worked for so long that these methods have now become engraved in the brains of the Fed. Get with the times Chairman Bernanke before the Federal Reserve Bank loses all credibility. Just look at the damage that former Federal Reserve Bank Chairman Alan Greenspan did in his career running the central bank. You are simply following in his footsteps.
Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com
