Higher Interest Rates Won't Help the Dollar
To be viewed as bullish for the dollar, inflation is operative only when one believes that the Fed is firmly committed to fighting it. Lost in translation is the fact that the Fed's anti-inflationary rhetoric may be just that - rhetorical. While bad news for savers and investors, higher inflation is actually the government's best friend and is the most politically expedient way to resolve America's economic imbalances and reduce the real burden of repaying its own debts.
When higher interest rates really start to take their toll on consumer spending and home prices, the Fed will either do an about face and start cutting rates in a desperate attempt to revive the economy, or it will continue to raise them, deliberately pushing the economy deeper into recession. Both scenarios are bearish for the dollar, and it is only a matter of time before the market figures this out.
It is also ironic that Stephen
Roach, who recently capitulated his long-held bearish position
on the global economy, just added his voice to the chorus calling
the rise in commodity prices a bubble. His principal reason
for doing so was his observation that given that there is no
inflation, commodity price increases of the magnitude recently
experienced were unwarranted, and should therefore be reversed.
That is like expecting an obese individual to lose weight simply
because he claims to be dieting, while ignoring his third trip
to the buffet table.
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Mr. Schiff is one of
the few non-biased investment advisors (not committed solely to
the short side of the market) to have correctly called the current
bear market before it began and to have positioned his clients
accordingly. As a result of his accurate forecasts on the U.S.
stock market, commodities, gold and the dollar, he is becoming
increasingly more renowned. He has been quoted in many of the
nation's leading newspapers, including The Wall Street Journal,
Barron's, Investor's Business Daily, The Financial Times, The
New York Times, The Los Angeles Times, The Washington Post, The
Chicago Tribune, The Dallas Morning News, The Miami Herald, The
San Francisco Chronicle, The Atlanta Journal-Constitution, The
Arizona Republic, The Philadelphia Inquirer, and the Christian
Science Monitor, and has appeared on CNBC, CNNfn., and Bloomberg.
In addition, his views are frequently quoted locally in the Orange