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The U.S. Dollar Index Drops The Stock Market Pops

If anyone did not believe me before they will certainly believe me today when it comes to the inverse U.S. Dollar Index/stock market relationship. Everything inflates higher when the U.S. Dollar Index declines. It does not matter if the U.S. Dollar Index is positive on the session or not. As long as the U.S. Dollar Index declines the major stock indexes inflate and rally higher. Today the U.S. Dollar Index sold off around 10:30 am EST and the S&P 500 Index staged a 13.00 point rally. This is as inverse as it gets.

While many people rejoice over the higher equity and commodity prices from a weaker U.S. Dollar Index it is important to know that all asset classes are denominated in U.S. Dollars, therefore, the gains are muted or limited when you think about it. Real wealth is created when a currency rises or at least holds steady while the asset prices increase. For example, in the 1990's people gained real wealth. However, this is nothing more than artificial inflation which should ultimately end in a disaster. Ride it out while it lasts. It won't last forever.

A similar game was played by the former Federal Reserve Bank Chairman Alan Greenspan and we saw what that lead to. The recent move by the current Federal Reserve Bank Chairman Ben Bernanke is unprecedented and more powerful than Greenspan's plan to the 100th power. One can only imagine what this bubble is going to look like when it pops? What can make the 2008 financial crisis and the housing bubble look like small potatoes? We shall see.