By Richard Russell

We're dealing with a situation that has no precedent in world history. We have a situation where 20 central banks on the planet are all under political pressure to keep their respective currencies competitive. No nation (despite what they may state for publication) wants a strong currency. A "cheap" currency allows for competitive exporting. A cheap currency also places a nation's assets on the bargain table. And that, of course, is the case with the US today. The "bargain" dollar has turned the US into a veritable "candy store" for much of the rest of the world. In terms of real estate, corporations, tangibles located in the US, everything looks like a bargain to a businessman or an overseas investor.

The fact that the world is now operating on a fiat currency basis has placed the planet on an endless inflationary escalator. The culprit is the phenomenon of "competitive devaluations." If a given nation's currency becomes noncompetitive ("too strong"), that nation's central bank creates more of its own currency and with that newly created currency -- it buys dollars. This strengthens the dollar in terms of the nation's own currency, rendering that nation's currency competitive again, at least in terms of dollars.

However, this process has no automatic brake which would serve to bring this endless currency production to a halt. As a result, the world has become an ever-expanding ocean of fiat currency. The term for this process is well-know in financial circles, it's called -- monetary inflation. If this process continues (and it is continuing), monetary inflation always produces price inflation. Today we are experiencing both monetary and price inflation. We see indications of price increases everywhere --from the price of bread to the cost of a college education, from the price of a man's shirt to the cost of a hotel room in New York or London or Paris or Dublin.

I believe the cheap-dollar phenomenon has a great deal to do with the fact that the Dow and the leading US stocks are rising while the secondary stocks and the advance-decline lines are lagging. However, I also note that the majority of US stocks, as gauged by the various advance-decline lines, are now heading higher. Thus, the advance-decline lines are still lagging, but like the Transports they've been moving IN THE RIGHT DIRECTION, and that is bullish.

Aside from the US government's ridiculous manipulations and lies, the true inflation rate in the US is probably running at about 7%. With the yield on the bellwether 10-year Treasury note at 4.67%, US interest rates are now negative. Negative interest rates are bullish for investors. They mean that borrowing has become both cheap and profitable. Negative interest rates also tend to be inflationary.

The world trend now is to move out of fiat currencies and into something tangible, something of essential value that can't be printed or created by pressing a button. Thus, the dollar (fiat currency) cost of everything from gold and silver to diamonds to platinum to classic art to collectibles to coast real estate is rising.

Thus hard assets.