Look to Emerging Markets as the Federal Reserve Diminishes the Dollar

The main thrust of the past two months has been the renewed collapse of the U.S. dollar. The dollar has been on a one-way elevator ride to the ground floor since August, when U.S. Federal Reserve Chairman Ben S. Bernanke first warned that quantitative easing was on the horizon. Most recently, the minutes of the Federal Open Market Committee's (FOMC) last meeting telegraphed further monetary stimulus. ''In light of the considerable uncertainty about the current trajectory for the economy, some members saw merit in accumulating further information before reaching a decision about providing additional monetary stimulus," the minutes read. "In addition, members wanted to consider further the most effective framework for calibrating and communicating any additional steps to provide such stimulus. Several members noted that unless the pace of economic recovery strengthened or underlying inflation moved back toward a level consistent with the Committee's mandate, they would consider it appropriate to take action soon." Concerns about inflation being too low almost guarantees additional quantitative easing unless the recovery gets a big shot in the arm before the next meeting in early November.