For those of you who have been long US dollars this year it must seem like US dollar panic selling is not only underway but has been around for awhile. But now I’m talking about the rout in the dollar going hyperbolic. That’s quite a difference from merely being in a long term downtrend.

The dollar’s quick move to below 100 Yen and to the north side of 158 against the Euro has been painful for dollar bulls and for many others, like oil exporters, who price their products in dollars.

However, the move has not quite gone hyperbolic into a full scale panic - yet. With the moves that the US Federal Reserve Bank has been making we are probably very close to a complete collapse of the dollar which will bring on the hyperbolic stage.

The Bear Sterns disaster has placed the fed into a real bind. Just a day after announcing the 200 billion emergency lending facility that was designed to inject liquidity into the world’s banking system the “run on the bank” at Bear shows just how dangerously far the credit crisis has progressed.

Even with the liquidity injection into Bear Sterns counterparties on the Street in London and elsewhere are refusing to deal with Bear. Bear is probably fatally wounded. Their business model is broken and it is unlikely that they will be able to control the downward spiral leading to the failure and breakup of the firm.

The Fed and JP Morgan announced an undisclosed amount of emergency funding for Bear. Futures markets are now pricing in a full one percent cut in interest rates at the March 18th FMOC meeting.

Should the Fed cut rates by a full one percent the dollar will once again come under intense pressure. This may be the interest cut that completely undercuts the dollar. The hyperbolic stage of the long running dollar decline may be about to get underway.

A full blown dollar collapse will be a disaster for the world economy. With a full blown credit and leverage implosion in the works the added disruption of a dollar collapse may cause a systemic failure of the international banking system. Some big name banks could go under under such conditions.

One sad note is that the chairman of the Federal Reserve, Ben Bernanke, doesn’t seem to realize that the steps he is taking in what will be a failed mission to save his Wall Street friends is having such a negative effect on the dollar and the effect will only make economic conditions worse for the US economy.

Helicopter Ben actually said while testifying before congress that a falling dollar would not hurt Americans except for those who live or travel outside of America. He seems to be clueless about the falling dollars role in escalating inflation in commodity prices, especially oil, and how a high rate of inflation is so difficult to control once under way.

Prepare yourself for an exciting bang up March. A number of high profile banks and investment banks will be reporting first quarter earnings next week and they will likely be bad, actually worse than bad. This can kick off another wave of dollar selling as the fear of the collapse of a major financial institution in the US could turn into panic selling of American dollars and equities.

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