CNBC commentator Larry Kudlow takes the Federal Reserve to task for not doing enough to fight the dollar’s decline and gold’s rise.
The greenback recently fell to a one-year low against the euro last month, and gold charged above $1,000 an ounce. It now has hit $1,025, an 18-month high, on a rumor that oil states could dump the dollar.
The oil producers issued a quick denial, but the gold move shows the increasing lack of confidence in the greenback.
Last week’s policy statement by the Fed “sends a message that Bernanke & Co. doesn’t care one wit about the sinking dollar or the rising gold price,” Kudlow wrote on CNBC’s web site.
“In fact, the latest policy directive removes last month’s reference to commodity-price increases, while there is no reference to the greenback at all. The central bank is going to keep buying mortgages and adding to its balance sheet of high-powered money creation.”
Kudlow argues that the Fed is fanning inflation.
“The bottom line is that the Fed is going to continue to create an excess supply of new dollars, which is why the dollar exchange rate is likely to keep falling, while gold and other commodities keep rising,” he writes.
“Today’s incipient inflation will become much more pronounced in the next year or two.”
Kudlow says that at this point, the United Sates “has no exit strategy for fiscal or monetary policy.”
Fed officials have offered contrasting opinions about how to reverse monetary stimulus in recent days.
"Obviously there are differing views. . . in projecting the timing of a process of removing policy," including raising interest rates, Atlanta Fed President Dennis Lockhart told reporters this week.
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