Currency expert Chuck Butler says any short-term recovery for the dollar against the euro is exactly that: short term. He says weak US fundamentals will continue to drag down the greenback. So will the Fed’s legacy of printing too many dollar bills. Until growth in the money supply is reined in, the value of the buck isn’t going to rebound…

The euro recovered a bit yesterday after last Thursday’s tailspin… And the recovery was smack dab in the face of some weak economic news from Germany! Here’s what got the euro going and moving up once again yesterday…

S.F. Fed Head Janet Yellen was speaking yesterday, and decided to “come clean” with her assessment of the U.S. economy… Yellen told her audience that she believed the economic slowdown would last for some time and that the jobless rate would continue to rise… The markets got a slap in the face with that talk, as they had all but forgotten the flaws in the economic fundamentals in the U.S. They were all wound up with the fact that European Central Bank (ECB) President, Trichet, didn’t sound hawkish last week!

Trichet’s words may have, at the time, moved the markets, but in the long run, won’t be enough to overcome the bad U.S. fundamentals…

U.S. mall vacancies rose to a 13-year high in June… This is a real illustration of a slowdown in Consumer spending… Consumers are spending, they just aren’t spending it anywhere else but the gas station and grocery store!

The euro mini-recovery failed to drag the other currencies along for the ride yesterday. This doesn’t happen very often, but did happen yesterday… Maybe it will be a delayed action by the “little dogs”…Irwin Keller writes articles for MarketWatch, and I usually like what he has to say… And yesterday was no exception.. Yesterday, Irwin Keller wrote about how the dollar is wagging the economy’s tail… Let’s take a minute and see what Irwin has to say…

“When the dollar goes down in world financial markets, the price of oil goes up. And, as we saw in early trading on Monday, when the buck bounces higher, oil takes a tumble. So where does the Fed come in, you might ask? After all, it can’t produce one barrel of oil, no matter how low it pushes interest rates, so one must conclude that Fed actions can influence neither the supply of oil nor the demand for it. And if this is true, then the Fed has nothing to do with oil’s price, right? Wrong, the actions of the central bank can go a long way toward determining the price of petroleum because these days, the value of the dollar against other currencies has a lot to do with the price of oil.

If our central bank were to remove some dollars from the global financial system, the buck would rise in value against the other currencies.”

Yes… That’s called Money Supply… When you print tons of dollars and flood the market with them, the value of the dollars you printed goes down… It’s been that way since the days of bartering… And, long time readers know that I have a strong distaste for the Money Supply the Fed’s been pumping out for some time now… There are those that believe the Fed is slowing Money Supply… Well, if that’s true, they aren’t slowing it enough!

Source: Where There’s Smoke…