I have been very bearish on the Dollar for the past few years however the events of the last few days and the response of the dollar have led me to the following thoughts The dollar rally could be very real and indicative of a long term shift in the market back to a strong dollar. Here why 1) The government has been inept for the past 6 months with regards to the handling of this crisis. The last 2 weeks have reached new levels of ineptitude, regardless of your thoughts of the bailout bill, it is clear our government is incompetent. Yet the dollar continues to gain. If the events of the past few days with the treasury secretary about to burst into tears over the horrors he has seen, cant signal a complete dollar collapse i don't know what will. 2) The Market had expectations of a bailout and when it didn't materialize we began a freefall that dropped the $INDU 9% in one day, Everyone was screaming financial armageddon and yet we could not move gold beyond $900/oz, this signals while there is a flight to cash, people are perfectly ok holding dollars. 3)The big fear that foreign debt holders may sink us for the moment seems unlikely. China and Japan have been very patient. More Patient then our own Government. And our future prosperity is so linked that it seems remote at this point that they would dump our debt in a panic. 4) While the credit crisis is significant all indicators are still firing towards lukewarm economic performance as opposed to full fledge economic meltdown. People keep waiting for the shoe to drop and it doesnt, so 7% unemployment is on the horizon, this is not end be all. We have had much worse in the last 30 years. 5) Yes Yields and credit is erratic at the moment but I think smart money is realizing that these yields may be all over the place to the erratic behavior of government as opposed to true credit crunch and contraction of liquidity. After all if you are a bank, you want to hold on to any new loans at the moment until you see what the terms are of the new bill. 6) The Fed has pumped an enormous amount of liquidity into the system in the past few weeks, and all that cash is tied up. Eventually either by government mandate or market needs that log jam will burst and those funds will flow. Yet rates are not going to get any lower. This means that the FED is more serious about setting a bottom in the dollar. Is the smart money betting that U.S is being primed for another boom again, dollar is not getting cheaper for the short term. long term the dollar has to weaken until at least 2 of the 3 issues below are resolved 1) massive money expansion 2) massive government defecit 3) Massive interest payments Conclusion: Assuming no 911's in the near term, gold has peaked. Dollar will continue a rally for the next few months. I would love to hear counter arguments for dollar strength.