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Falling dollar gives the stock market a boost.

We had every reason in the world to start of a healthy correction and strengthening of the dollar.  Yet this morning the double edge sword still slices.  The dollar is falling and its friend inflation is sprinting towards reality. 

This is a foolish and reckless rally if it is based on leaked information.  The only thing that would justify the move this morning is if the Fed indicates that it will continue its easy money policy and devaluating the dollar.  This is only building pressure to an already cracked financial system.  The result will be a total collapse of the dollar sometime in the future if they continue this policy much longer.

With the amount of dollars that they are borrowing, devaluation of the dollar makes sense.  The only problem is that at some point countries that hold dollar reserve will say enough is enough.  At what level that is NO ONE knows.  But I promise you, the minute one of the big dollar reserve country like China or Saudi Arabia starts to spend significantly more dollars than they make, we are in a world of trouble.  If they diversify from the UDS, that same problem just got twice as bad.  If commodities become traded in local currencies, game over.

Because of this, I’m expecting a market reversal today and strengthening of the dollar based on what Bernanke says this afternoon.

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