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Bernanke Meets the Press / favors a 'strong' dollar as the dollar falls.

Chairman Ben Bernanke proved to be a skillful monetary politician at the first of his Federal Reserve press conferences yesterday, sounding equally worried and watchful as he fielded questions about both rising prices and high unemployment.

But the real story of the day is that the central bank continues to be far more worried about jobs than inflation and plans to keep monetary policy wide open for several more months at least. The official Fed Open Market Committee statement after its two-day meeting repeated the central bank's promise of "exceptionally low levels for the federal funds rate for an extended period." As borrowers and savers alike know, that rate has been nearly zero since December 2008, an unheard of period of monetary ease.

Inflation? Mr. Bernanke conceded it has climbed recently, but don't worry, it will be "transitory." Higher gas prices? They're a real "hardship" for people, but they are merely the result of rising global demand, unrelated to Fed policy, and also likely to be transitory. The expected report later this week of mediocre economic growth in 2011's first quarter? Yes, but also "transitory," which was more or less the word of the day.

By our lights Mr. Bernanke's least credible moment came on the dollar. The Chairman repeated the bromide that preserving the purchasing power of the greenback is a core central bank goal, which he said it will accomplish by keeping inflation low and reviving growth to attract capital from abroad.

Mr. Bernanke had clearly worked out his dollar remarks with Treasury Secretary Tim Geithner, whom he saluted for saying a day earlier that "our policy has been and will always be, as long at least as I'm in this job, that a strong dollar is in our interests as a country."

The only trouble is that no one believes this. Capital has been fleeing dollar-denominated assets for months because investors believe that the Fed and Treasury are at best agnostic about dollar devaluation, at worst playing beggar-thy-neighbor to boost U.S. exports and force China to revalue its currency.

Investors kept up the selling yesterday, with the dollar hitting new post-2008 lows. Gold climbed to $1,529 an ounce, while oil and other commodities rose as well. In early 2009, gold sold for about $900 an ounce. So it takes about 600 more dollars to buy an ounce of gold today than it did two years ago. We wonder how this fits with his goal of preserving the dollar's purchasing power—which is a good question for Mr. Bernanke's next press conference.

We should add that the stock market also rose, benefitting from the prospect of more liquidity and betting on faster growth in the rest of the year. One mystery is how Mr. Bernanke can take credit for a rising stock market while saying the Fed has nothing to do with rising commodity and other asset prices. There's another question for his next press event.


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For the record, the dollar is strong and it is not falling.

In fact, the dollar is growing stronger.

What is falling and what is weak and getting weaker, is a piece of paper with the word "dollar" printed on it.

Those bank notes are NOT dollars.

No amount of "belief" makes them so.

You can't magically imbue a piece of cotton with the purchasing power of 371.25 grains of .999 silver by simply printing fancy pictures and adding the word "dollar" to it. History since 1913 proves that quite starkly.

The solution to a failing paper currency is to stop using it and return to using dollars.

If we ever hope to convince the unwashed masses to demand a return to sound money, we will have to counter this silly notion that what we are presently using are "dollars" and that what they really are, are just banker's paper. And who trusts the bankers these days?