james turk says the dollar rally is over, and it will resume its long term decline, as the fed will do whatever it takes to flood the market with liquidity. if he is correct, gold and silver could continue to move higher:

Whatever It Takes

The Federal Reserve today made clear its intention to continue flooding the system with newly created dollars. It says in effect that it will do whatever it takes.

Its Federal Open Market Committee (FOMC) lowered the federal funds interest rate target to a range of 0%-to-0.25%, which is an historic low, but it didn't stop there. The FOMC also announced that it would "employ all available tools" in an attempt to jumpstart the moribund economy. That means it will monetize assets of all sorts. It will turn debt into more US dollar currency.

The Fed would have us believe that low interest rates and easy money will solve today's monetary and economic problems. It was of course low interest rates and easy money that put the US - and much of the world - into this monetary and economic mess in the first place. Is it reasonable to expect that the cause of today's problems is also the cure? No, of course not, and the Fed knows that too. But there is some method to their madness.

They hope - and it is nothing more than that - that low interest rates and easy money will spur consumer confidence, causing banks to lend and people to go out and spend. It won't work though, as can be easily proven by picking up a good textbook or two. Monetary history makes clear the recurring boom/bust cycle.

Banks lend too much, creating the boom. The bust then follows after it becomes clear that the boom was built upon easy credit that fostered bad decisions.

We have had the boom. We are now in the bust. We have moved from a period of over-spending and over-borrowing to one in which the bad loans and bad decisions from the boom years come home to roost, creating the bust.

The Federal Reserve wants us to believe that the sole problem reverberating throughout the world is simply a lack of liquidity, but it is nothing of the sort. It is in fact one of solvency. Most banks and many consumers and companies are over-extended, and their precarious financial position cannot be put right with newly created dollars.

Many loans were made recklessly and imprudently, and the borrowers as well as the lenders are suffering the consequences. Low interest rates and easy money will not make economic those houses built on speculation, those shopping malls built unnecessarily, and those companies whose business models rested upon ill-founded assumptions about the health of the US economy. The debts of imprudent borrowers cannot be repaid in a timely way because they own assets acquired in the boom that with the benefit of hindsight are uneconomic even with zero interest rates.

What's needed today is the same medicine that has over time inevitably cured every other bust. It is capital and savings, and unfortunately, they are in short supply in today's America. But the Federal Reserve will not be deterred from pursuing the reckless path it is on. They seem to think that they can avoid the bust, and further, that the economy can emerge unscathed from years of imprudent and reckless credit extension by the banks.

History says the Fed is mistaken, but history also tells us something else. The consequences of the Fed's actions will debase the dollar, perhaps irreparably so. It is the same message being given by the market, as indicated by the following chart of the US Dollar Index.

The dollar's bear market rally that began in July ended last month. Based on closing prices, the US Dollar Index has dropped 8.5% since last month's peak. The drop so far this month is a stunning loss of 6.7%.

Since last month's peak in the Dollar Index, gold has climbed 6.3%, while silver did even better. It has climbed 12.6%. These precious metals are clearly the place to be, given the path of monetary debasement being taken by the Fed.

http://goldmoney.com/en/commentary.p...