The weak dollar policy has served the last two administrations well but this policy can succeed for only so long. At some point the combined cyclical and structural forces of deflation – which will culminate in late 2014 when the 120-year cycle bottoms – will prove overwhelming and no amount of policy will contain it. The Fed can only weaken the dollar to help the multinationals for so long before grassroots political backlash and an overly weak dollar come back to haunt it. Fed Chairman Bernanke is too intelligent to let that happen. The most likely outcome isn’t an economy that is killed by a weak dollar but an economic collapse by 2014 led by deflationary forces which Bernanke, et al, have no control over.
