You heard it here first, and now it is official. Federal Reserve Chairman Ben
Bernake said, and I quote, that "Dollar intervention may be justified in
Disorderly Times."
In my Monday,
July 14th "Journal" post, I said;
Going forward the news continues to assume the Fed is out of bullets,
they're pushing on a string, and all the negatives that come with this kind of
talk. Yes, the Fed made be close to being out of conventional type bullets, but
this is when bullets are replaced with intervention.
The biggest problem facing the economy and consumers is the high price of
energy. Unless the powers in control want to drive the U.S. economy into the
ground, the must use other means to turn the economy around. What can they do?
Intervention!
Over the next few months, I believe intervention will include;
1) Supporting the dollar and forcing shorts to cover. I believe the G-8 will
help the dollars woes, and countries with stronger currencies will begin helping
the U.S. by aggressively buying the greenback. In turn, the dollar will rally,
shorts will cover, and energy prices will fall.
I don't claim to be a genius, but the only common sense move for the Fed at
this point an time is to support the dollar through intrevention, force shorts
to cover, and drive energy prices down.
Here are some of Bernanke's comments from MarketWatch.
Crude oil prices dropped as much as $6.00/bbl today on Bernanke's support for
the dollar and after the government reported that U.S. crude and gasoline
inventories rose much more than expected.
We have been saying for several weeks that all the pieces were in place to
drive oil prices lower.
1) Supporting the dollar and forcing shorts to cover. I believe the G-8 will
help the dollars woes, and countries with stronger currencies will begin helping
the U.S. by aggressively buying the greenback.
2) Demand destruction- According to the Federal Highway Administration,
"Americans drove 22 billion fewer miles from November through April than during
the same period in 2006-07, the biggest such drop since the Iranian revolution
led to gasoline supply shortages in 1979-80."-
3) Americans are trading in SUV's and lower mileage vehicles for more fuel
efficient ones.
4) Oil purchases for our nations Strategic Petroleum Reserves (SPR) have been
temporarily halted.
5) Election year magic! Over the past 100 years, the DJIA has gained an
average of 9.7% during the second half of a presidential election year.
Has the magic just begun?
