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Watch Out: Bernanke's Shocking Dollar Comments Could Rock Markets

Posted Jun 04, 2008 09:55am EDT by Aaron Task in Investing, Newsmakers, Recession

Ben Bernanke shocked the financial markets Tuesday with some uncharacteristically blunt language about the dollar, saying he supports "ensuring that the dollar remains a strong and stable currency."

Previously, Bernanke has deferred to the Treasury Secretary on currency matters, a policy prior Fed chiefs also followed.

But changing rhetoric and trying to "jawbone" the financial markets is one thing. Taking action to support the dollar is another entirely.

The Fed can use its open market operations to buy Treasuries or otherwise coordinate with other central banks to buy dollars. But Bernanke essentially admitted raising rates is going to be tough for the Fed to do anytime soon: "Growth risks will remain to the downside" until the housing market stabilizes, he said.

Meanwhile, a stronger dollar will help dampen commodity prices, which American consumers would surely welcome. But a weak dollar has been good for U.S. multinationals so investors in big-cap stocks like IBM and Boeing might not enjoy a stronger dollar -- assuming, of course, Bernanke really can engineer a turnaround.

After rallying yesterday, the dollar was down vs. the euro and yen in recent trading.

13 Comments

you
Megeve Mike - Wednesday June 04, 2008 10:49AM EDT

Let's wait and see.

you
stocktd555 - Wednesday June 04, 2008 10:54AM EDT

All you will get out of Helicopter Ben is talk.The dollar has been in a multi- year decline against all the major currencies and now the Asian currencies as well. Under his predecessor Greenspan gimmicks such as core inflation, hedonic adjustment, substitution and geometric progression were instituted to distort the true rate of inflation the average American has to pay to live. This phony rate allows the government to pay super low interest rates on Treasuries and thus lower the debt service on the national debt and also lowers cost of living adjustments on Social Security payments and federal pensions. It also means negative returns retirees who put their money in CDS and bonds. It is also highly inflationary because the low interest weakens the dollar and cuts purchasing power. It is great for the Wall Street hustlers who get low cost capital to engage in their risky schemes, but is misery for the common working man who sees his paycheck buy less and less. Bernake is cut from the same bolt of cloth as Greenspan. Expect the dollar to keep declining and your standard of living with it.

you
Yahoo! Finance User - Wednesday June 04, 2008 11:08AM EDT

One thing this country needs to do is bring back the jobs that have been sold to foreign countries, keeping the income here. Sure it's going to cost a little more money but with the dollar staying here it becomes worth more. The next real change has to be in jobbing out manufacturing to other countries we have unemployment at a record high over 5% and that dose not take into account the people who have exhausted unemployment and are no longer counted, the real figure of unemployment in the US is in the 11 to 12% range. These unemployed workers could fill positions at a lower cost and keep jobs here. Look around at all the small and large cities with empty buildings who once produced goods, reopen the buildings the cities would give tax brakes to get the revenue back and glad to see people in their cites have jobs wow what’s wrong with helping ourselves and our fellow men and women in this country. YOU WANT A STRONGER DOLLAR KEEP IT HERE.

you
Yahoo! Finance User - Wednesday June 04, 2008 11:09AM EDT

One thing this country needs to do is bring back the jobs that have been sold to foreign countries, keeping the income here. Sure it's going to cost a little more money but with the dollar staying here it becomes worth more. The next real change has to be in jobbing out manufacturing to other countries we have unemployment at a record high over 5% and that dose not take into account the people who have exhausted unemployment and are no longer counted, the real figure of unemployment in the US is in the 11 to 12% range. These unemployed workers could fill positions at a lower cost and keep jobs here. Look around at all the small and large cities with empty buildings who once produced goods, reopen the buildings the cities would give tax brakes to get the revenue back and glad to see people in their cites have jobs wow what’s wrong with helping ourselves and our fellow men and women in this country. YOU WANT A STRONGER DOLLAR KEEP IT HERE.

you
Yahoo! Finance User - Wednesday June 04, 2008 11:10AM EDT

One thing this country needs to do is bring back the jobs that have been sold to foreign countries, keeping the income here. Sure it's going to cost a little more money but with the dollar staying here it becomes worth more. The next real change has to be in jobbing out manufacturing to other countries we have unemployment at a record high over 5% and that dose not take into account the people who have exhausted unemployment and are no longer counted, the real figure of unemployment in the US is in the 11 to 12% range. These unemployed workers could fill positions at a lower cost and keep jobs here. Look around at all the small and large cities with empty buildings who once produced goods, reopen the buildings the cities would give tax brakes to get the revenue back and glad to see people in their cites have jobs wow what’s wrong with helping ourselves and our fellow men and women in this country. YOU WANT A STRONGER DOLLAR KEEP IT HERE.

you
Yahoo! Finance User - Wednesday June 04, 2008 11:11AM EDT

One thing this country needs to do is bring back the jobs that have been sold to foreign countries, keeping the income here. Sure it's going to cost a little more money but with the dollar staying here it becomes worth more. The next real change has to be in jobbing out manufacturing to other countries we have unemployment at a record high over 5% and that dose not take into account the people who have exhausted unemployment and are no longer counted, the real figure of unemployment in the US is in the 11 to 12% range. These unemployed workers could fill positions at a lower cost and keep jobs here. Look around at all the small and large cities with empty buildings who once produced goods, reopen the buildings the cities would give tax brakes to get the revenue back and glad to see people in their cites have jobs wow what’s wrong with helping ourselves and our fellow men and women in this country. YOU WANT A STRONGER DOLLAR KEEP IT HERE.

you
lottocoop2 - Wednesday June 04, 2008 11:32AM EDT

The policy of weak dollar triggered unprecedented growth of oil prices. The USA lost more money on high oil prices then won from weak dollar. .

you
Yahoo! Finance User - Wednesday June 04, 2008 01:12PM EDT

Whats up with all the duplicate postings on here. It happens all over. Was it the users or Yahoo's bug. They ought to take a look at this prob. It's too damn annoying. The folks at Yahoo, please do something.

you
Stephan Cy - Wednesday June 04, 2008 01:44PM EDT

yahoo errors! sorry to say, but despite many problems like false financial data and many feedbacks about them since several years, the folks at yahoo never did nothing, even not confirm that they ever received, read and understood a complaint. everything will remain unchanged until THEY change their attitude towards their customers

Yahoo! Finance User
Yahoo! Finance User - Wednesday June 04, 2008 03:18PM EDT

On Wall Street they cheer that wages aren't rising to keep pace with the rise of oil and food for the average working person.. Pathetic scum all of them, Bernanke included. Anything to save their precious banks.

you
Yahoo! Finance User - Thursday June 05, 2008 07:43AM EDT

I will believe it when it happens. Interest rate need to reflect our true inflation numbers. Fat chance.

supersteve82000
supersteve82000 - Thursday June 05, 2008 11:50AM EDT

lets wait and see what happens.

you
El Matador - Tuesday June 10, 2008 10:48AM EDT

We are a troubled group of people as Americans. No wonder Europe and the rest of the world dislike us. Over the last several years, Inflation has been non-existant. Unless you were buying a home or sending your child to college, cost of goods have been flat. This is a normal, if not, expected array of events. Let's bite the bullet, do what we do best as American and adapt. The dollar will strengthen in due time and I promise you, it won't be because of a politician or who our next President will be.

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