Before Hyperinflation Dollar to Become World's "Weakest Currency"

Yesterday, JPMorgan & Chase Co. reported its anticipated impact of $600 billion in additional quantitative easing on the dollar, which will be devastating. JPMorgan finds it likely loose monetary policy could cause the dollar to collapse below 75 yen and become the weakest of planet’s most-traded currencies.

According to Bloomberg:

“The U.S. central bank, along with those in Japan and Europe, will keep interest rates at record lows in 2011 as they seek to boost economic growth, said Tohru Sasaki, head of Japanese rates and foreign-exchange research at the second-largest U.S. bank by assets. U.S. policy makers may take additional easing steps following the $600 billion bond-purchase program announced this month depending on inflation and the labor market, he said.

“’The U.S. has the world’s largest current-account deficit but keeps interest rates at virtually zero,’ Sasaki said at a forum in Tokyo yesterday. ‘The dollar can’t avoid the status as the weakest currency.’

“…The U.S. currency has declined against 12 of its 16 most-traded counterparts this year, according to data compiled by Bloomberg.”

Sasaki fingers a widely-shared concern, that the $600 billion QE2 program is quite possibly just the second in a long line of “additional easing steps.” Already QE1 failed to achieve its objectives and yet the Fed’s at it again, implementing a program that cements Bernanke’s ignominious legacy, as DR founder Bill Bonner recently described:

“…the US Federal Reserve said it was creating another $600 billion to buy US Treasury debt. That will mean a total of $2.3 trillion added to America’s monetary footings since the Fed began its QE program almost two years ago. This will also mean that Ben Bernanke has added three times as many dollars to America’s core money supply as ALL THE TREASURY SECRETARIES AND FED CHAIRMEN WHO CAME BEFORE HIM PUT TOGETHER.”

Will the dollar weaken? It seems only possible that it must. You can read more details in Bloomberg’s coverage of how JPMorgan predicts the dollar is set to become the world’s “weakest currency.”


Rocky Vega,
The Daily Reckoning