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Bernanke: May 5th Rewind

May 11, 2011 11:13 PM ETSPY, UUP, XOM
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Look at what happens when the U.S. Dollar Index is let out of its cage and allowed to trade. The major commodities are plummeting today just as they did last week on May 5, 2011. The Federal Reserve and the current administration are starting to feel the heat from other countries, and many of the citizens that are living on fixed incomes in the United States, therefore, they are letting the dollar rally higher. When you think about all of the debt problems in the European Union regarding Greece, Ireland, Portugal, Italy, Belgium, Spain, and others nations it is still amazing that the U.S. Dollar Index is not much higher.

Since the middle of last year, the Federal Reserve has created about $500 billion worth of cash reserves. This is insane when you think about it. Money created out of thin air so that the stock markets can be propped higher. There is no question that the Federal Reserve will try and kill the U.S. Dollar again sometime down the road. That seems to be Ben Bernanke's way of keeping the economy afloat. You see, the last time the Federal Reserve let the dollar trade was in the first half of 2010. At that time the dollar surged higher from November 2009 to June 2010. This dollar rally caused the stock markets to have their first severe correction. Then Ben Bernanke, pulled out the QE-2 ($600 billion U.S. Treasury purchasing program) and the major stock indexes started to soar right back up. What ever happened to supply and demand? Trading and investing for the long term now simply depends on the amount of money the Federal Reserve will create.

The problem that the Federal Reserve ran into recently was that commodities such as gasoline, and food prices have just become too expensive. People that know very little about economics are demanding that prices for things people need such as gasoline, and food, need to come down as they are no longer affordable.

Recently, Ben Bernanke, said that commodities were higher due to supply and demand. What planet is this guy living on? This is planet Earth, not planet Fed. What is this guy thinking? Doesn't he know that a falling dollar, the world's reserve currency, will lead to inflated prices for goods that people need to survive? Of course he knows, however, now he is trapped. Therefore, he will now allow the dollar to bounce a little and have these prices deflate before he drops the dollar again in order to inflate the markets back up. It has been a game of yo-yo for the Fed. When the U.S. Dollar goes down the major stock markets go up and vice versa. We can only wonder, how long will this game last?

Nicholas Santiago

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