Bernanke Knows the Dollar is Doomed

Fed Chairman Ben Bernanke is trying to support the dollar, making rare statements on Tuesday about how the weak dollar has contributed to inflation, and that the Fed is closely monitoring the dollar.

Bernanke went on to repeat his inflation concerns while speaking at Harvard University yesterday, saying that “some indicators of longer-term inflation expectations have risen in recent months, which is a significant concern for the Federal Reserve. We will need to monitor that situation closely.”

Interestingly enough, his comments come at a time when my models have been forecasting a bounce in the buck, and a short-term correction in gold, oil and other natural resources. So Bernanke’s unconvincing attempt to support the dollar comes as no surprise to me.

These moves tend to happen at normal turning points in the market, which proves once again that it’s not the news that drives the markets necessarily, but it’s the markets that drives the news. If Bernanke was so concerned about inflation and the dollar contributing to inflation, why did he let it depreciate so much in the first place?

Bernanke’s words are too little, too late – it’s nothing more than political jawboning to try and support the buck. Deep down inside, he knows the dollar is doomed.

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