Posted by WARREN MOSLER on May 25th, 2011
Looks like it’s happening as suggested if might just as crude started breaking down after the Ben Laden assassination.
And the Saudi investor prince’s proclamation that the Saudis thought $70-80 for crude was their target might at least indicate that they aren’t in price hiking mode.
Another point up in the dollar index might bring the beginning of short covering by trend followers.
But still looks to me like it’s only the beginning of what should trigger the end of the looming inflation that never was and a return to deflationary psychology in general.
The fallout of the dollar reversal will continue to be lower term rates, weaker stocks, weaker commodities, and in general a reversal of the ‘the fed’s printing money’ hysteria. And I also suspect Congress and the President will come through with a deficit reduction package that will further exacerbate the dollar shortage and add a bit of drag to the world economy.
Nor is any of this is good for the euro zone which continues to fight the fact that the only way it all works is if the ECB writes the check, provided, of course, they all recognize capital requirements for the ECB are nothing more than a self imposed constraint.
(And yes, I know that’s asking a lot.)