With the dollar up a relatively fragile 1.8% in the last two days, hope grows that the economy can finally get back on track. At least, that's the story America's mainstream news outlets seem to be selling at the moment. Just look at what the greenback's gravity-defying skew has allowed Helicopter Ben to say without having a rotten tomato tossed at his face. Here he is Monday night, addressing a Fed-sponsored conference in Boston: "Despite the unwelcome rise in the unemployment rate that was reported last week, the recent incoming data, taken as a whole, have affected the outlook for economic activity and employment only modestly." Is this guy cool, or what? A week ago he couldn't have gotten a CETA job forecasting the weather in Igloo, South Dakota. Now, with the dollar ever-so-timidly on the rise, Helicopter Ben seems to have regained credibility in the newsrooms, and reporters appear to be taking seriously any hints that the Fed's next move will be to tighten. Yeah, sure. And here's the deed to a bridge that you can give Dad for Father's Day. With the U.S. economy weakened almost to the point of coma, pushing rates higher would be like tossing an anvil to someone who is drowning. But that hasn't stopped the punditry from speculating about an imminent reversal of monetary policy, or exchange traders from laying odds that the Fed will tighten by October. We're not buying it, though, since we remain convinced that all of the commodity inflation we've seen so far, even $139-a-barrel oil, is insignificant compared to the deflationary juggernaut that has yet to unwind. You think the housing bust has been nasty so far? Wait till you see how it unfolds with the banking system under siege. Splat! Those who believe that tightening lies ahead
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