A Race to the Bottom

Fed funds rate: 0.11 Fed reserve target rate: 0.25 Prime rate: 3.25

Despite all efforts to talk up the stability of the dollar for the last three years, the Fed and Treasury's media campaign is falling apart. The flood of stimulus was, for the most part, misappropriated and as QE2 runs it's course into June, more irrational Fed activity is expected. Current policy is unsustainable, current growth is synthetic and plans for managing the debt and liabilities are not only unrealistic but a sure sign these issues will not be taken seriously on a broad basis until it is too late.



Now that the US dollar has taken out the next level of support at 74.25, we again look to the next level at 71.20. A dip down to new lows is only a matter of time and will be a fleeting wake up call to the market. The long term trend even verses other major fiat currencies is down and the loss of the reserve status over the next 36 months would be a major catalyst to the erosion of purchasing power as confidence is lost.