With global economic data showing signs of slowdown, the Federal Reserve is ever-so-close to moving toward a third round of quantitative easing, a program where it acquires long-term securities with newly created money. Fed Chairman Ben Bernanke recently hinted that the central bank could take further action, and if history is any indication, his comments could be the first step toward a slide in the dollar.
The Fed has already completed two rounds of QE, the first launched in late 2008 and the second in late 2010. Both times, a downward pattern emerged for the dollar. Using the new Wall Street Journal Dollar Index to get a broad measure of the dollar's value, expect the 22-month high in the index hit earlier this week to be the peak.
As a guide, here's how the dollar moved in 2010 leading up to and just after the Fed's second round of quantitative easing:
--The dollar hits a 15-month high in June 2010. The WSJ Dollar Index peaks at 78.882 on June 6, 2010. The dollar's big rally comes on the heels of new fears about a brewing debt crisis in Europe.
--The index falls through early August before climbing again in mid- to late August.
--The WSJ Dollar Index's August 2010 peak comes on Aug. 24, just a couple of days before the Federal Reserve's annual Economic Policy Symposium in Jackson Hole, Wyo.
--Mr. Bernanke says the Fed is considering a second round of bond purchases among other options to bolster the economy during a speech at the symposium. The dollar trades erratically for a couple of days before settling into a steady decline in anticipation of the program, which will add to the supply of greenbacks in the market.
--The Fed formally announces plans for "QE2" on Nov. 3.
--The WSJ Dollar Index bottoms Nov. 4 at 67.546, a 14% drop from the 15-month high hit in June and down 9% from the August high just before the Jackson Hole summit.
George Gilder, whose new book publishes today, is one of the original pillars of Supply Side economics. As stated by Discovery Institute, which he co-founded, “Mr. Gilder pioneered the formulation of supply-side economics when he served as Chairman of the Lehrman Institute’s Economic Roundtable, as Program Director for the Manhattan Institute….”
He was the living writer most quoted by President Reagan. And he is back with his most brilliant work yet — one of potentially explosive importance if taken to heart by our political and policy thought leaders. It is a radical guide, with surprising insights on almost every page, to the creation of a new era of vibrant prosperity.
As reviewer Paul Brodsky, a professional investor in New York City, perceptively notes,
"Lewis Lehrman is one of a very small group of contemporary gold advocates able to successfully bridge the gap separating practical conservative intellectualism from fleeting, half-baked idealism. His CV lists great success across many fields including education (degrees and teaching fellowships from Yale and Harvard); industry (past president of Rite Aid); politics (narrow loser to Mario Cuomo in the 1982 New York governor’s race); finance, (past Morgan Stanley managing director); private sector entrepreneur (founder, L. E. Lehrman & Company); public sector advocate (founder, Lehrman Institute); historian (author, Lincoln at Peoria: The Turning Point); and recognized philanthropist (awarded the National Humanities Medal by George W. Bush in an Oval Office ceremony). ... Only someone erudite and elegant in demeanor could hope to pull it off . In an irreconcilably over-leveraged world where irritated bond vigilantes question economic sustainability and angry Tea Partiers protest the immorality of it all, Lehrman’s views are considered and his convictions carry weight. He brings gravitas to his cause, and he does so from within as a member of the club."
Before the Fed: JP Morgan Summons the Bank Presidents
"Finally, on the night of Sunday, November 2, Morgan summoned the presidents of the major New York banks to his new library, at the corner of Madison Avenue and Thirty-sixth Street, an Italian Renaissance-style palace he had built next door to his house to showcase his collection of rare books, manuscripts, and other artwork. Its marble floors, frescoed ceilings, walls lined with tapestries and triple-tiered bookcases of Circasian walnut, crammed full of rare Bibles and illuminated medieval manuscripts, made it an incongruous setting for a meeting of the banking establishment. Once the moneymen had gathered, Morgan had the great ornamental bronze doors to the library locked and refused to let anyone leave until all had collectively agreed to commit a further $25 million to the rescue fund."
— Liaquat Ahamed, Lords of Finance (Penguin Books, 2009, p. 54)
Lately we have been engulfed by headlines reporting financial turmoil on every continent, in almost every nation, large and small. The commissars of central planning who so marred the history of the 20th century have been replaced by central banks in the 21st. In Cyprus, the new leadership now dares to confiscate citizens’ wealth with a one-time tax of up to 60 percent on bank deposits above 100,000 euros. Self-interested prime ministers blame continental monetary policies for instigating the currency wars that they themselves surreptitiously carry on.
America recently celebrated — well, maybe we didn’t celebrate – the 80th anniversary of Franklin Roosevelt’s action to end to the gold standard. But America is also celebrating – well, maybe not everyone is celebrating – the 100th anniversary of the legislation creating the Federal Reserve System.
As Lewis E. Lehrman...
Constitution.org provides an extensive and thoughtful Memorandum of Law by Larry Becraft, Esq., of Huntsville, Alabama, on Article I, Section 10, clause 1 of the US Constitution.
Sir William Blackstone courtesy of Wikipedia
One of many interesting matters the Memorandum treats is Blackstone's Commentaries, a book that was a fixture in the...