Between Dow Jones And Six Million Dollar Man 2

Then along came Paul Volcker to manage the Federal Reserve. A man ahead of his time, he raised interest rates to nearly 20 percent to wring out and halt the rampant inflation within the system. Defying many skeptics at the time, he succeeded and price inflation subsided. For the next 20 years, prices were relatively stable.

The same cannot be said for the US money supply. The number of US dollars within the global system has continued to expand rapidly. The world today is flush with US dollars, and we believe this partially explains the sharp rise in asset and commodity prices.

Holders of US dollars are converting them for tangible assets. Nations such as China, Japan, India, as well as OPEC members are accumulating US dollars by the trillion. It remains to be seen just how long this will continue as the dollar is continually damaged by the growing money supply, trade and budget deficits and national debt which is climbing towards $9 trillion.

With the decline of the US dollar in recent years, purchasing power abroad has also fallen dramatically. Within the United States, inflation has remained relatively subdued (although the Federal Reserve is becoming more uncomfortable). However the true picture has been clouded by the fall in the dollar.