European Central Bank President Jean-Claude Trichet jolted the markets Friday with the announcement that the ECB will gradually withdraw the emergency cash injections it has added to the financial system, in order to prevent an acceleration in inflation.

"Not all our liquidity measures will be needed to the same extent as in the past," Trichet said at a conference in Frankfurt Friday, Bloomberg News reported. "Any non-standard measure whose continuation would pose a threat to the achievement of price stability must be undone promptly and unequivocally."

The price at the cash register ticked higher in October, though it was driven by the cost at the pump and on the lot.

Energy prices and new car sales (the highest in 28 years) pushed consumer prices upward in October, they're still cheaper than they were a year earlier. The Labor Department reports that consumer prices edged up 0.3% last month, a tad higher than the 0.2% anticipated. Take food and energy out of the equation, and inflation rose 0.2%, again ahead of the 0.1% that analysts expected.

The U.S. housing market continued to show weakness in the latest reading. Here are the Commerce Department's latest numbers:

• Housing starts dropped 10.5% to 529,000 units. The expected number was 600,000.
• Groundbreaking for single family homes fell 6.8% last month to an annual rate of 476,000 units.
• Starts for multifamily homes fell sharply to a 53,000 annual pace, a drop of 34.6%.
• Compared to October last year, housing starts fell 30.7%.

The only thing that has been devalued faster than our precious dollar is the perpetual slide in government credibility. Over the years we have heard countless times about the importance of a strong dollar from our leaders.

"Our administration believes in and will do everything in its power to support a strong dollar" or something like this has been spewed out by Republicans and Democrats alike, yet there is little evidence that the policies put in place over the past century have done anything of the sort. Perhaps there was one person that took the heat and did the right thing -- Paul Volcker, during the Carter administration, who had to deal with dizzying inflation.

In a speech to the Economic Club of New York, Federal Reserve Chairman Ben Bernanke addressed concerns about the falling US dollar.

How? He says he is "attentive to the implications of changes in the value of the dollar" and will "monitor these developments closely".

That's a wonderfully Orwellian turn of phrase because it means precisely nothing.

A wise trader once told me: "It's all in the price. All the thoughts, ideas and emotions of all the traders throughout the world are in that one number."

Gold is trading at $1,118.00 per ounce. What is that number telling us? Pure and simple, the market is telling us that inflation is on the way. The Indian government just bought 200 tons of gold valued at over $7 trillion dollars. In other words they exchanged $7 trillion US dollars for the 200 tons of gold.

At the same time the December US dollar contract traded below 75.00 on a trade-weighted basis. What is that number telling us? Traders are turning in dollars for other investments, mainly stocks and commodities.

Don't count me among Henry Blodget's admirers, but he makes an interesting argument in a recent video posted on BusinessInsider.com (see below). Blodget argues that Federal Reserve Chairman Ben Bernanke has a "secret plan" to keep interest rates too low for too long on purpose. Why? To encourage inflation. According to Blodget, Bernanke has two good reasons for doing this:

• Faster economic growth, which leads to more jobs, fewer angry constituents, and a Congress that's happier with Ben Bernanke.
• Faster erosion of the real value of our debts. Consumers and the government are drowning under a massive debt load. One way to make paying off this debt easier is to make the dollars it is denominated in worth less. Bernanke will try to hasten this process as much as possible, taking it right to the point where our creditor China is mad as hell -- but not quite to the point where China actually stops lending to us.

Wednesday, the Fed announced that interest rates would remain at zero to 0.25% for at least the next six months.

The Fed statement read as follows: "weak conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The only change in the Fed's policy was a tweak in the amount of corporate debt that the Fed intends to buy.

What could complicate the U.S. Federal Reserve's job to boost the economy? The price of oil. That's correct: the price of crude -- the world's most important commodity.

The reason? The impact of a high price of oil on prices throughout the U.S. economy.

Just call them dueling worldviews, or outlooks. In one corner is economist Joseph Stiglitz, who sees deflation as the primary threat to the U.S. economy, in the quarters ahead.

"Deflation is definitely a threat right now," Stiglitz, an economics professor at Columbia University, told Bloomberg News. "The combination of the deflation threat and the sluggish recovery should keep the Fed on hold for quite a while."

Is a 'super-currency' – one that could for all intents and purpose replace the dollar as the world's reserve currency – possible?

Well, it is possible, but in this case the aforementioned switch would certainly be super, as it would represent a gargantuan task and adjustment period for members of the global financial system.

The U.S. Federal Reserve's quantitative easing and Congress' record $786 billion fiscal stimulus package run the risk of re-igniting inflation, in the interpretation of the inflation hawks. But not PIMCO's Bill Gross: he's concerned about deflation.

Gross, who heads the world's largest bond fund, said he's buying longer-maturity U.S. Treasuries as protection against deflation, Bloomberg News reported Tuesday.

The Fed plans to use "reverse repos" to drain liquidity from the banking system.

What's a reverse repo? It is quite simple. Let's start with the regular Treasury auctions. The primary dealers (dealers approved by the Fed) and indirect bidders, usually foreign and other investors, bid on Treasury notes and bonds. That leaves the primary dealers with an inventory on hand; that is, unless they then can resell it to other investors.

With ever growing uncertainty whether our economy will face inflation or deflation in the months to come given recent government spending, what is certain is that no one wants to see their fixed income lose purchasing power. Unlike most bonds that pay out a fixed dollar amount in interest, treasury inflation protected bonds (TIPs) pay out a fixed amount over the consumer-price index (CPI), making them a popular choice for investor anticipating the economy to experience inflation. If inflation is higher than projected, the government adds to your principal on a TIP and makes up the difference!

Not only does owning TIPs allow one to keep up with monthly bills that are increasing in step with inflation, they are an important asset class to consider when determining an asset allocation strategy. TIPs enable one to further diversify a portfolio. Bonds are ideal for those not able to stomach much risk and TIPs in particular protect one's fixed income from eroding.

It has been about a year since Lehman Brothers failed and this financial crisis started, and it has hit many of the banks hard including Bank of American (NYSE: BAC), Citigroup (NYSE: C) and America International Group (NYSE: AIG).

There has been one thing that has been bugged me in the coverage of it since then. Frequently, reporters use words like unprecedented or unparalleled to describe it. That is false! Financial crises, panics, crashes, bubbles, and bank failures are really about a dime a dozen.