UPDATE: 10/9/09 @ 9:30 Am eastern: Apparently Mr. Bernanke read my blog and is starting to take action, first with just words of "tightening policy". I remain a skeptic until action is taken.
The USD trended down today, making a new low for 2009, spiking towards the end of the day higher.
At this point, no one is investing in company valuation, the entire market is directly moving to the US dollar rising or falling. A slow bleed has been yielding a rise in the market.
Once the dollar breaks into the yellow zone I posted yesterday with conviction, gold should explode higher, and the equity markets may start to swoon.
The problem is, if the dollar goes below 70, now the country is under pressure for a possible US currency collapse. And in that territory, the government may not beable to stop it, since the US Dollar is valued by other currencies trading with it.
The Federal Reserve knows a dollar collapse will help no one, and the markets will start to fall, not rise, in response to a challenge to the currency valuation.
I believe (but cannot be certain) that when the time comes Ben Bernanke will fold his bluff hand and do something to firm up the dollar, like raise interest rates. I have a problem believing Ben will do this, since his life's thesis will at that moment be proven to be a failure. He could not print the US into prosperity, and he brought the US to the brink of collapse.
Mr. Bernanke isn't stupid, but like all men, he has an ego. Let's hope his brain overcomes his ego and he defend the dollar in the final hour.
The fact the country is near such a perilous position, but the media has failed us, the "system" has failed us, is disturbing to say the least. The moral to story, individuals cannot be trusted, the system must rely on open market CAPITALISM trading. The Federal Reserve Bank is an abomination, and no one should yield the power that they do.
Alternately, an event will be announced to scare markets lower, to once again scare people into bonds, a trick that continues to work to reinforce the dollar. But that trick will grow old, and may not work someday.