US economy could withstand sharp dlr drop-Bernanke

[UpInArms]

http://today.reuters.com/investing/financeArticle.aspx?type=bondsNews&storyID=2006-03-21T233026Z_01_N21342616_RTRIDST_0_ECONOMY-BERNANKE-UPDATE-1.XML

WASHINGTON, March 21 (Reuters) - The chronic U.S. trade gap need not fuel a "precipitous" decline in the dollar, but the economy could handle it if it did, Federal Reserve Chairman Ben Bernanke said on Tuesday.

"Although U.S. trade deficits cannot continue to widen forever, these deficits need not engender a precipitous decline in the dollar, nor should such a decline, were it to occur, necessarily disrupt financial markets, production or employment," Bernanke said in a letter to Rep. Brad Sherman, a California Democrat.

The letter, which was released by Sherman's office, was in response to question the lawmaker submitted in connection with a Feb. 15 House of Representatives Financial Services Committee hearing on monetary policy.

In the letter, Bernanke also restated the Fed's position that Congress should review an exemption that allows commercial firms to acquire industrials banks, warning that decisions on the issue could have "important ramifications" for the U.S. economy.

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Here's your "shot across the bow" folks - this is Mr. "Printing Press" "Chopper (helicopter money" Ben Bernanke at his "finest".

Remarks by Governor Ben S. Bernanke

What has this got to do with monetary policy? Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

Think about it. What one commodity does the US import the most of? Oil.

If the dollar is worth less, it will take more dollars to buy it.

Bend over, it's coming.