September 27, 2007

Bernanke's panicked rate cut is purposefully destroying the dollar to try to save the banks. This will not be pretty.

It's sad watching the dollar die. Especially as an expat. Americans who scrimped and saved and planned for retirement, and didn't or don't diversify out of US$, are gonna get slaughtered. And they have no idea. It's just so easy to trick 'em, ain't it?

The stock market may go up, nominal home prices (not inflation adjusted) may drop less than they would have, but the smart people in the room will know the dirty little secret:
Inflation is raging, an economic collapse is underway, and the buying power of the dollar is being purposefully and expertly destroyed.

BusinessWeek: Does the Fed Care Only for the Street?

Bernanke's belief that the central bank should slash rates at the start of a bear market is untested, inflationary, and bad for the buck

Aside from the dollar and long-term bonds, markets rose last week as the Federal Reserve demonstrated that it is more fearful of a slowing economy and banking woes than inflation. In fact, it is willing to sacrifice the dollar to save the banks. Just last month, the Fed was saying that the threat of inflation is just as great as the threat of a slowdown in the economy. Now it is cutting rates in a huge way as the Dow nears its all-time high, gold is making new highs, and the price of oil is exploding.

The Fed is obviously terrified. It means that he is gravely concerned about the state of real estate and banking in the U.S.

If the credit markets don't revitalize in the next few weeks, you can expect to see the Fed lower rates again by another 50 points at their October Federal Open Market Committee meeting no matter where the dollar, gold, or the Dow are. They have signaled that they don't give a damn about the dollar. All they care about is Wall Street.


Yoski said...

"They have signaled that they don't give a damn about the dollar. All they care about is Wall Street."
Sad but true. The real consequences will become obvious once stupid foreigners wake up to the same realization and quit funding our debt. "You want oil? Your $$ are not welcome any longer. What goods can you trade us in exchange for oil?" What will we trade them? Happy meals with a side order of cheesy fries? I doubt they go for that. That's when reality will set in for the Fed, Wall Street and the rest of America.

borkafatty said...

Well there you have it folks..Down 78.17...lowest dollar valuation since the 1980's..I would say the Dollar has just about had it...when China dumps We are in the dump...But from what i see they already may be dumping ....I dont know good luck...Oh and where are all the Tin Foil hat Homos at.

FlyingMonkeyWarrior said...

It is gonna get ucking fugly.

Anonymous said...


I thought a lot of what you were saying was tin foil hat before. Now I'm starting to see you were right.

WTF is happening to this country?

And before any of you numbskulls reply back some nonesense about Bush and republicans, take a look who runs Goldman Sachs, who ran it before...hint they were Democrat Senators and Clinton Administration members.

This isn't about dem/rep this is about the 1% of the country tha is billionaires or multi-millionaires vs. the other 99% that isn't.

Anonymous said...

Dollar falls to an all-time low this morning. That is, the DXY (dollar index) busted through the 78.19 low set in 1992.

Keith, I love your site. You have great graphics and you are always looking to stir things up and have a good time. Thanks for banging the drum, HPers around the world appreciate it.


Edgar said...

Another new low today.

Anonymous said...

The dollar (and all money) is a medium of exchange and it is not going to go away in the long run. Regular people (including people from the military and people with guns at home) will go to the gas station or Wal-Mart or Costco or Schnucks to buy cigs, beer, toilet paper, charcoal, eggs, milk, diapers, etc. As more and more of them wake up to what is happening they will become increasingly pissed and demand change. The people who are presently trying to kill the dollar to favor the super rich who do not want to see a deflation in the value of their paper or hard "assets" are going to pass in time. They may win the battle but they will lose the war. There is too much weaponry and know how among the general "unwashed masses" to see a Zimbabwe style inflationary run for any real period of time. When Joe Six Round from the Bootheel of MO sees the price of a case of Red White and Blue go three times the price he paid six months before, he's going to start thinking.

Smug Bastard

nick said...

Eventually the US Dollar will lose its status as the primary international currency -- the mean of exchange for trade, the storage of wealth for reserve.

That will happen not because the dollar is weak, but because the Fed has proven themselves unwilling to support the value of the currency.

When that happens, so goes the superpower status of the United States, economically, politically, financially, militarily, and diplomatically.

Rome wasn't built in one day, but it sure will fail in one day. We can almost see the tipping point now.

Learn from Jim Rogers, and teach your kids Chinese.

Anonymous said...

"Real" inflation is raging. I own several restaurants and our costs for meat and produce are up 30% compared the last year. 30% !!. Then there is labor (we have automatic inline minimum wage increases) in WA state. Then there's the power bill, and all the fuel surcharges our vendors are tacking on. Cost of borrowing, sky rocketing. All these costs are going to have to be past on to customers soon.

But anyway, inflation is contained - yeah unless you have to eat or heat a home.

gekko said...

i'm going to start investing in companies that make keyboards with the Euro symbol above the 4. maybe i'll design a new keyboard with multiple currency buttons on there, including the amero symbol

Anonymous said...

I've heard it's SO BAD (how bad is it!) that drug dealers no longer accept greenbacks!

Seriously though, is.. is that Bob Rubin's signature in the lower right hand corner? (If so, they've been doing target practice for some time!)

Also having the V.P in the upper left with an Italian made custom shotgun (in full hunting apparel) was a nice touch too!


Anonymous said...

I quiet enjoy watching foreigners losing massive amounts of money on their dollar denominated assets, and dollars the hold. I encourage them to continue accepting US dollars for the goods they produce for us, with their hard labor, even though the dollars we pay them keeps going down in value. The entertainment value I get from this is very important to me.

henry hill said...

We can trade McMansions and condos for oil. How about we sell Florida and California to pay off our debt? Foreigners seem to like our beaches and coastal areas. The Europeans can buy Florida and the Asians can buy California. That should net us about $15 trillion to pay off our debt and fund SS for another generation.

Anonymous said...


Anonymous said...

Man, I can definitely understand where Yoski is coming from. We exported all our factories and manufacturing capability to China. We exported our service jobs to India. Now all that's left is the crumbling housing and finance industry, and health care. Since the dollar is now worthless, the health care industry is next after the housing and finance industries die off. Forget retail if nobody can afford to buy anything with worthless dollars. I'm waiting for a dollar sell-off, extravagantly expensive food, extravagantly expensive energy. Sorry, but if I had my choice between a sandwich and a visit to a doctor for a routine physical, I'd take the SANDWICH!


Anonymous said...

Raise a $10 pint for me Keith I just clicked on some ads for ya!

Anonymous said...

Raise a $10 pint for me Keith I just clicked on some ads for ya!


I try to remember to click on the countrywide ads when they come up!

Anonymous said...

For the life of me, I can't understand why Oil is just $82.

Given that the Feds have crapped all over the U.S. dollar again, Oil should be about $110 and still going north.

And then dumbass Americans wonder why prices are going up.

Anonymous said...

Just clicked some ads too

Anonymous said...

nick wrote: "Learn from Jim Rogers, and teach your kids Chinese."

Generally a good idea (and I agree with the rest of your post as well). However, a side note. It doesn't matter whether Jim Roger's kids study Chinese, Swahili, Klingon, or drugged-out-trustfunder-ese: as kids of a billionare, they will be all set in the coming turbulent years. For the rest of us, however, learning to say "Would you like fries with that?" in both Mandrin AND Cantonese might come in handy.

deep dish or crispy said...

Maybe we could trade those Halloween french fry McCoupon booklets? You know, 10 free small fries for $1.00. (x 50 trillion)= 500 trillion orders of small fries.

Anonymous said...

Yes, and banks are behaving themselves by not giving loans out like candy...

Peter said...

None of this will occur until some bogus attack on U.S. soil polarizes Americans even further. At this point, Israel and the US will launch an attack on Iranian infrastructure. In this manner, the incompetent cronies club will have the boogy man to blame for the demise of our economy.

Matthew said...

"And before any of you numbskulls reply back some nonesense about Bush and republicans, take a look who runs Goldman Sachs, who ran it before...hint they were Democrat Senators and Clinton Administration members."

You talkin about Robert Rubin?

Yeah, he's a megamillionaire Goldmanite, but he believed in a strong dollar, and backed it by action

Rubinomics worked. It delivered sutained real growth. Real inflation adjusted wages finally went up for all segements of the population. And remember, "surpluses as far as the eye could see".

Of course they're all in it for Wall Street too---the difference is that some want the average person and nation to gain prosperity as well, and the rest don't give a crap.

abb said...

No worries... they're working on higher oil prices. Attacking Iran should happen any time now.

Then they can say "It's not our fault. Oil is causing inflation".