Diverging dollars and $145 billion stimulus

I would guess that most of the intelligent readers that visit my blog are fairly intelligent and probably already know the meaning of diverge and divergence but just to be sure. di·verge / [ di-vurj, dahy-] verb, -verged, -verg·ing. –verb (used without object)

1.to move, lie, or extend in different directions from a common point; branch off.

2.to differ in opinion, character, form, etc.; deviate.

3.Mathematics. (of a sequence, series, etc.) to have no unique limit; to have infinity as a limit.

4.to turn aside or deviate, as from a path, practice, or plan.
–verb (used with object)

5.to deflect or turn aside.

I am going to use the first definition to describe what I believe happened and the other 4 I will use in a sentence and reference the definition by # at the conclusion. What happened this week? The dollar strengthened against most pairs (except for the yen) why is that? I have heard many people say the dollar is over extended, I highly disagree.

The commodity market pulled back significantly. There have been a lot of concerns about inflation, so when the market sees a5% pull back in gold a 10% pull back in oil and an almost 13% pull back in the commodity related indices, many have felt, wrongly as it may be, that the inflation concerns may soon be over.The dollar move was driven by commodities falling and nothing more.

The bearish dollar trends are continuing and the antidollar fundamentals are still strong. This week alone, the US economic data was mediocre at best. The "good" new or upside surprises were nothing more than someone trying to lose weight and saying "hey, sure I ate three big macs but I had a diet coke, that's a positive right?" The economy is slowing (probably due to eating those extra big macs and falling asleep at the wheel), the housing market is still pulled over to the side of the road blowing chuncks from the nasty hangover from last night's party(think real estate boom, you know the climbing housing prices had to be alcohol and drug induced) and paramedics are still trying to use the jaws of life (see FOMC rate cuts and Presidential Economic Stimulus package) to get our credit market out of the tangled wreckage it is trapped in.

If the dollar is gaining strength when the dollar should not be gaining strength this is a divergence (1). It has extended in a different direction then where it should be. Add to this the FOMC rate cuts and Presidential Economic Stimulus Package. What is going on here? Fed Fund Futures show 50 bpp cut in Jan and a 100% of another 25 bpp in Feb and an almost 30% chance of a 50 bpp cut. Add this to the announcement by President Bush today. Our executive branch has asked for a stimuli package to the tune of 1% of GDP, in case you didn't know GDP is over 14 trillion, therefore a cash injection into the market of about $145 billion dollars.

***DRAMATIC PAUSE***

That's right, flood the market with US dollars, weaken the dollar further, in the midst of inflation concerns, go the wrong direction, cut rates which will drop demand for theUS dollar (first time in 15 years the US rate will be lower than the european interest rates) which will further weaken the dollar, making everything that much more expensive, making it less possible for us to have expendible income (despite the capital injection, $800 won't go very far when the dollar's value is cut in half) making us Americans buy less things, making companies produce less which will induce them to lay off workers, and further increase unemployment, drop GDP, and put the final nail in the coffin of the economy ("put away the jaws of life boys, there is no hope, time of death…").

OK enough already, the other definitions.

If you diverge (2) from what I have just written, you need to understand my intelligence is divergent(3- that's right having no finite limits). So ifyou so choose to diverge(4) from truth it will be very easy for me to diverge (5) your poorly backed opinions.