The US dollar made a comeback after Federal Reserve chief Ben Bernanke warned that a weaker US currency encouraged inflation and said there would be no more rate cuts for the time being.

The greenback climbed more than 1 cent against the euro, and the price of gold dropped $8 after Bernanke’s remarks.

“All inflationary measures are rising and have been for over a year now,” says Keith Fitz-Gerald in Money Morning, “despite the fact that the Fed has apparently only just recently noticed inflation is rising faster than it would like.”

“And it explains why commodities, some consumer durables and other traditional hiding places continue to defy all odds and rise despite record high valuations like oil, for example. The Fed isn’t running the show and never has, despite what the media and most people seem to think.

“And ‘nowhere,’ as legendary investor Jim Rogers pointed out when I talked with him recently at his home in Singapore, ‘does the Federal Reserve Act say the Fed is supposed to bailout Wall Street.’ Which means that uninformed investors may be reading something into the Fed’s actions that the Fed itself isn’t charged with.”

“The Federal Reserve itself has been instrumental in promoting abnormality,” says James Howard Kunstler in The Daily Reckoning, “by doing everything possible to prevent the work-out of bad debts in the system. Since money is loaned into existence, and loans are debts, the work-out of bad debt suggests the discovery that a lot of money has disappeared — which is exactly the case.

“The Fed has postponed the work-out by sucking up truckloads of impaired, untradable securities in exchange for loans to giant banks who don’t have enough cash on hand to pay their janitors.”