The dollar is falling again

It looks like the U.S. Dollar Index is heading back down toward 81. Should anyone be worried? Are all those new FOREX traders with their late-night infomercial study guides and charting tools going drive the dollar over the edge?

That chart looks bad and appears to be getting worse - just in the last few weeks. The euro is now clear of $1.36 again and the pound has retaken $2.01.

Where does the buck go from here?

Many pundits would have you believe that "technical factors" make the 80-81 area on the chart very dangerous. A "technical breakdown" could result in much lower numbers, very quickly.

Last Tuesday, everyone saw what a technical breakdown looked like when silver plunged six percent in just a couple hours.


Silver looks to be rebounding nicely today, thanks in part to the dollar weakness.

One thing to remember about the greenback is that the world's worst bankers and economists are still at the controls of the printing presses over there in Japan and the Yen is still a huge part of the U.S. Dollar Index.

Whenever you think that things might be getting bad for the buck, remember that there's a worse currency out there and that it accounts for 14 percent of the U.S. Dollar Index as currently constructed.

Remember too that there are literally no limits to which Japanese central bankers will not go to continue to carry out whatever misguided monetary policy they embarked upon twenty-some years ago when they impressed the rest of the world with their booming economy that quickly turned into one of the greatest financial bubbles in history.

We seem to have had a lot of financial bubbles in recent history.

They are still recovering from those mistakes (or attempting to) and don't appear to be anywhere close to "normal", though, in a world increasingly awash with easy money, easy credit, low interest rates, and high prices everywhere but in government statistics, it's hard to know what "normal" is anymore.

According to a Bloomberg report earlier today, the Yen just dropped to a 22-year low against the currencies of its major trading partners, an all-time low against the Euro, and almost a five year low against the dollar. It looks like deflation is back in Tokyo, one of the world's most expensive cities with one of the world's most undervalued currencies in the eyes of everyone but the local central bankers.

Maybe Japan should just get kicked out of the world economy for failing grades.