Monday, May 12, 2008

Should We Worry About the Plunging Dollar?

"All told, we do need to worry about the plunging dollar. We are now at the point where the Fed has done enough to stimulate the economy by lowering interest rates and must turn its attention to the inflationary implications of the sinking dollar. I hope that the recent hints that Fed is done easing are enough to strengthen the dollar. But if they are not, the Fed must reverse direction and raise interest rates. Ultimately price stability will benefit our economy far more important than the short-term stimulus of another rate cut."

The above quote is the last paragraph of the article and quite interesting as Siegel has usually been a Bernanke cheerleader, this hints that if the Fed doesn't start doing something different.....Siegel may not be so cheerful.

I've been critical of the Fed during this crisis, mostly for the same reasons Siegel has been a cheerleader. Buffet even supported the Bear Stearns "bailout", I wasn't so sure. Both Siegel and Buffet are much smarter people than me, only time will tell.

For those of you who are worried about "the dollar" read this article.

For those of you who have been watching the dollar, it seems it has turned a corner over the past week and is now getting stronger. I've said it before and I'll say it again.....everything cycles, keep that in mind.

Scott Dauenhauer, CFP(r)