Utah has had enough of the Federal Reserve and has recently passed a bill to make gold and silver legal tender and shops will soon be able to accept gold Buffalo and Eagle coins – but not Napoleons or Kruggerands! It seems Utah has had enough of the Fed’s systematic determination to fight deflation which has seen the US dollar fall to historic lows. Over the past 6 years the percentage of people who believe the Fed is doing a “good” or “excellent” job has fallen from 53 to 30 per cent and in an opinion poll carried out last year by Bloomberg 16% of US citizens would like to abolish the Fed altogether.
In a recent PR effort, Bill Dudley, the president of the New York Fed travelled to Queens, a borough of NYC, to discuss the economy and the workings of the central bank. However, his audience was unimpressed with his assurances that, even as food and energy costs were rising, “today you can buy an iPad2 that costs the same as an iPad 1, that is twice as powerful”. One member of the audience retorted: “I can’t eat an iPad.” Shades of Marie Antoinette’s quip : “Let them eat cake”! and we all know what happened to her!
Whether the current “end the FED” campaign moves mainstream still remains to be seen. However, if the US dollar does continue to fall with consequent rises in commodities and unemployment levels remain high, the FED may indeed not be around to celebrate its centenary in 2013.
For traders and investors regardless of what you are trading, be it bonds, equities or commodities, whether you like it or not you are actually a currency trader and, as such, the dollar index should always be the first index you look at when you open up your trading account. At the moment the index is heading towards the key 75 level and any break here will see the index test the all time low of 70.70, so the next few weeks will be interesting for us all, driven by what many see as the “Fed’s financial foolishness”.