Federal Reserve Chairman Ben S. Bernanke said yesterday the dollar remains the world's reserve currency and while its decline is raising oil prices and a threat of inflation, he doesn't expect it to seriously crimp the economy or consumer spending power.
"I don't see any significant change in the broad holdings of dollars around the world. Dollars remain the dominant reserve asset, and I expect that to continue to be the case," Mr. Bernanke said, pointedly disputing an assertion by Chinese officials on Wednesday that the U.S. currency is losing status as the world currency. "It remains a standard of value around the world."
His testimony before the Joint Economic Committee failed to cheer global markets, however, as the dollar fell further and the Dow Jones Industrial Average dipped as much as 180 points to 1,000 points below its record high on renewed worries about credit, oil and the dollar.
So Ben, why is it that THE most accurate measure of how much money is actually circulating out there, the M3, is no longer even being published by the Fed?
Our currency is in an awful spot. The last time we had an inflationary squeeze, it was in the 70's, when the effects of spending for a war (Vietnam) and social programs (the beginning of the "Great Society" joined with worldwide political events to squeeze the price of oil. The difference between then and now is that we had a chairman of the fed who publicly acknowledged that the fastest way to destroy a nation's wealth is to inflate the currency. Paul Volker was willing to raise interest rates to ridiculous levels to choke it out, which caused the "mini depression" of 1979 -1981. It did kill inflation, though, and led to a scenario for the most vibrant ramp up in our economy since the 1800s. Bernake has no such testicular fortitude. He has publicly stated (and still states) that inflationary monetary policy is THE way to fight economic downturns. Other countries are not fools, though. They are dumping the dollar in favor of gold or other currencies as fast as they can sell them. China is leading the way. It looks really, really bad.
article is here