Sam Mathid
The period wherein the U.S. dollar was the official reserve currency of the western world is now over. That will neither be announced nor admitted by any government until they have finally dumped the dollars that they own. It is in everyone’s interest to maintain the facade, at the moment. In reality they want almost anything except U.S.$’s in their reserves.
Bernanke must dramatically raise interest rates to strengthen the U.S. dollar, that is a MUST. Of course that will mean the collapse of the whole U.S. real estate market within a month. That would lead to the absurd and sad situation of millions of empty houses within sight of millions of families living in cars and tents. Such an interest rise would take a Volcker on steroids which Bernanke most certainly is not, so of course he hasn’t raised interest rates, and he won’t.
His whole education and training make him more inclined to again drop interest rates in a forlorn attempt to re-start money flow into the asset area of the economy. Too late he has been disabused of some of his Ivory Tower notions and now knows that won’t work any longer either. ‘Fool me once shame on you, fool me twice shame on me’. Dropping interest rates would also precipitate a panicked flight from the U.S. dollar which would see a faster flood of ever more worthless dollars turning up in the supermarket and energy area of the domestic economy. No matter what Bernanke does or doesn’t do, the chickens are coming home to roost. More
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