When Central Bankers Clash, Stock Markets can Crash

The downward spiral in the German bund market widened the Euro's interest rate advantage over the US dollar, leaving the greenback on shaky ground and vulnerable to speculative attack. Bernanke would be under heavy pressure to match a second ECB rate hike to 4.50%, to defend the value of the dollar. In essence, the ECB could hijack US monetary policy, and force the Fed to guide the federal funds rate higher, in order to shake-out speculators in the crude oil and commodities markets.

Great stuff from Dorsch. I like the point about "oil vigilantes", and he makes it clear that the ECB, emerging markets and OPEC are basically taking control from the G7.

One thing I don't think he points out: even when central bankers raise rates, they are still likely to fail to raise them quickly enough to quell inflation. That means gold and commodities are likely to continue their bull market until the commodity and currency-destruction cycles play out to completion.