But the sentence that caught my attention most was the following, contained as it was in MM's captured excerpt:
When financial stresses were most pronounced, a flight to the deepest and most liquid capital markets resulted in a marked increase in the dollar. More recently, as financial market functioning has improved and global economic activity has stabilized, these safe haven flows have abated, and the dollar has accordingly retraced its gains.The question that caused my eyes to blink repeatedly in disbelief and head to uncontrollably nod from side-to-side was: Does The Fed Chairman actual believe this revisionist manure about what occurred? This seemingly unusual take on events (unusual for a Fed Chairman, not a freshly-minted academicwith no market experience) is clearly derived from the same School of Thought as the one spawning the Savings Glut hypothesis for America's large imbalances, and has as much probability of being correct (hint: not much).
So lets be clear about this once and for all. The rally in the dollar, along with the reversal of all trades across the markets from outperformance in highly-shorted securities to the correlation within the entire anti-dollar complex had virtually nothing to do with dollar primacy resulting from premeditated aversion to risk and almost everything to do with systemic deleveraging and consequential reversal of open positions, full-stop. Whether this was driven by pre-emptive attempts to reduce leverage in anticipation of, or reaction to changes in quantities and pricing-spreads of available credit, realized investment losses, and/or in response to firm or provisional demands by end-investors to their speculative agents for their money back, or all of the above and similar flavours of the same is, for all intents, irrelevant. To imagine otherwise (in light of the evidence of price movements across the panpoly trades) is disingenuous at best and ludicrous absurd puerile [please insert derogatory adjective of choice here] drivel at worst, and we should wonder aloud, who actually wrote this script for the Chairman, and admonish him (or less likely, her) accordingly.