The Federal Reserve Bank finds itself in a position it clearly wishes it were not in, for those in positions of authority there know that they cannot stand by and allow the dollar’s demise on their watch. However, they are powerless to stop the tide flowing against the dollar for according to law it is Treasury’s duty to act for or against the dollar, with the Fed merely there to take orders from Treasury and to put those orders into effect. The Fed can only raise or lower interest rates at the short end of the curve, and it knows that raising short term rates could help stem the dollar’s demise but no one at the Fed can or will move to raise the o/n fed funds rate for the “mere” reason of defending the dollar… not so long as unemployment continues to rise, and…. it shall continue to do that for several more months yet into the future, thus all but prohibiting the Fed from acting. Thus, will Treasury act to defend the dollar? The answer is “No, it will not.”
Treasury, under Mr. Geithner, has other things to concern itself with, including its myriad programs such TARP and PIPP and the like. Treasury actually believes that the weak dollar has its blessings for the economy, and it has chosen thus far to allow or hope for those supposed benefits to make their way through the economy. Treasury actually believes that a weak… but not too weak… dollar shall give way to greater export trade and lesser imports. That is all well and good but it is wrong. Lacking the “gravitas “necessary to stand up and say to the world that the US will not brook further attacks upon the currency and that policies shall soon be announced that will defend the dollar, Mr. Geithner is reduced to the all-too-familiar platitude that the US’s best interest is served by a “strong dollar,” when no one anywhere believes that anymore. So we shake our head and watch as the dollar falls relative and relentlessly to the EUR; falls relative and relentlessly to the Russian Ruble; falls relative and relentlessly to the non-US dollars; falls relative and relentlessly to gold… and this morning is even falling relative (but not so relentlessly) to the British Pound Sterling. It has come to this and it is sad indeed.
Ed Note: Dennis Gartman will be speaking at the:
The Money Talks All Star Trading Super Summit
Saturday, October 24, 2009 -The Sheraton Vancouver Wall Centre
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This brief comment from the Legendary Trader Dennis Gartman. For subscription information for the 5 page plus Daily Gartman Letter L.C. contact – Tel: 757 238 9346 Fax: 757 238 9546 or E-mail:firstname.lastname@example.org HERE to subscribe at his website.
Mr. Gartman has been in the markets since August of 1974, upon finishing his graduate work from the North Carolina State University. He was an economist for Cotton, Inc. in the early 1970’s analyzing cotton supply/demand in the US textile industry. From there he went to NCNB in Charlotte, N. Carolina where he traded foreign exchange and money market instruments. In 1977, Mr. Gartman became the Chief Financial Futures Analyst for A.G. Becker & Company in Chicago, Illinois. Mr. Gartman was an independent member of the Chicago Board of Trade until 1985, trading in treasury bond, treasury note and GNMA futures contracts. In 1985, Mr. Gartman moved to Virginia to run the futures brokerage operation for the Virginia National Bank, and in 1987 Mr. Gartman began producing The Gartman Letter on a full time basis and continues to do so to this day.
Mr. Gartman has lectured on capital market creation to central banks and finance ministries around the world, and has taught classes for the Federal Reserve Bank’s School for Bank Examiners on derivatives since the early 1990’s. Mr. Gartman makes speeches on global economic and political concerns around the world.