I normally don't talk about economic considerations on this blog. But the current situation calls for a few words.
Six months ago there was hope that fiscal policy - government spending - would pull the U.S. (and the world) out of the recession. At the time various Federal Reserve governors were giving speeches which indicated that the Fed would soon start contracting its balance sheet and withdraw liquidity from the U. S. and world economies.
But now it seems clear that there is no hope of any more government "stimulus" either in the U.S. or abroad. Partly for this reason the Fed Governors have started talking about adopting a price level of nominal GDP target instead of an interest rate target to guide their policies. This sort of change would mean a lot more quantitative easing ahead, liquidity injections that would continue until economic growth resumed and unemployment dropped.
More liquidity in the U.S. economy means a lower dollar and a higher - much higher- stock market. You may not agree with the Fed policy, but if it is implemented you can expect to see the dollar index at 66 (currently 77) and the S&P at 1500 (currently 1170) within the next 9 months.
