Washington Signals Dollar Deep Concerns

Over the past month there has been a statistically improbable concurrence of events that can only be explained as a conspiracy to protect the dollar from the Federal Reserve's policy of Quantitative Easing (QE).

Quantitative Easing is the term given to the Federal Reserve's policy of printing 1,000 billion new dollars annually in order to finance the US budget deficit by purchasing US Treasury bonds and to keep the prices high of debt-related derivatives on the "banks too big to fail" (BTBF) balance sheets by purchasing mortgage-backed derivatives. Without QE, interest rates would be much higher, and values on the banks' balance sheets would be much lower.

Quantitative Easing has been underway since December 2008. During these 54 months, the Federal Reserve has created several trillion new dollars with which the Fed has monetized the same amount of debt.

One result of this policy is that most real US interest rates are negative. Another result is that the supply of dollars has outstripped the world's demand for dollars.

These two results are the reason that the Federal Reserve's policy of printing money with which to purchase Treasury bonds and mortgage backed derivatives threatens the dollar's exchange value and, thus, the dollar's role as world reserve currency.

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