Has anyone noticed the Dollar has gone into freefall?
The Fed has pulled out all the stops to fight against the severe credit crunch that first hit our economy in August. The latest salvo in this mission is the Fed’s decision to allow banks to trade $200 billion in dubious mortgage backed securities for risk-free treasurys.
But, all this has done is reinforce the impression that the U.S. Federal Reserve will do anything to keep the U.S. credit crisis from having a bite — anything including stoking inflation. Everything costs more in dollars these days from bread and corn to oil, gold and the Euro.
The dollar is falling against every commodity and every major currency (see article: Dollar’s clout sinks worldwide). And recently the pace of that fall has quickened. The Dollar has been hitting all time lows against the Euro. It is now worth less than 100 Yen for the first time in 12 years. The Pound is worth $2. The Canadian Dollar has climbed above par for the first time in 30 years. The Swiss Frank is approaching par with the dollar. Soon, the Dollar might even fall below par against the Australian Dollar.
As far as commodities go, they have soared to unheard of levels since the Fed first began it’s easy money campaign in earnest. Gold cruised through its all time high of $800 per ounce all the way to over $1000 per ounce. Silver is worth over $20 an ounce. Commodoties like wheat, tin and copper are all setting new records. And oil recently hit $111 a barrel.
Americans are stupefied as to what is happening. We are wondering why everything is so bloody expensive all of a sudden. One need only to look to the Fed because it is the Fed’s irresponsible cheap money politics which got us into this predicament to begin with. Now, the Fed wants to use the same cure to get us out again.
Good luck, America.