The US Dollar: Worthless - Or Just Worth Less?

Ask any pundit who thinks they know something about the currency market, you know, just about anyone who's ever had a greenback in their pocket, reads the Economist so they sound sexy at a party, yet has no idea what it's like to pull an all-nighter watching a currency move the wrong way because of an obscure comment... ask that person what's the story on the dollar, and they'll tell you that it's falling to pieces.

Really?

Currency trading really got going in the late 1980's. The Brenton-Woods Agreement that allowed currencies to move on their own occurred in the 1970's. But, the real business of it didn't catch on until the mid to late 1980's. That's when you can really start looking at charts to find out what historical prices of currencies were. That's when real market forces were allowed to dictate exchange rates.

So, if you were to look at currencies and say that the dollar is worthless, I'd suspect you of being short-sighted and missing out on the total picture. Sure, it's 'worth less' than it's historical highs when in the 1990's, the Maestro engineered an economy that was unstoppable. But, since then, we've moderated off of those highs. In most cases, we've not even hit the all-time lows vs. the dollar.

Here are some charts that show the early 1990 levels, along with the late 90's rise of the dollar, and the subsequent early millennium fall.

I don't doubt that the U.S. dollar has some more downward area to explore with some of these currencies. I also don't think it's rational to say that the currency is in dire straits, either, just because we've come off of all-time highs.

As for the bigger picture in the dollar, I think a lot of it is going to stem from the direction of the one currency that remains to really have moved, USD/JPY. You start watching that one, and you'll likely to see what is really going to happen in the currency USD on a whole.

Update: Caravaggio sent this chart over. This is a chart of the USD aggregate since 1971. No cliff in sight just yet:

Comments

[Richard Dick]

Hi, David.
Can you tell me what price information/index was used to adjust the Broad Based and Major Currencies series?

Also, what was the rationale used in deciding to apply that information/index to those series?
Thanks,
Richard.

[Sr. Pessimist]

Depends on perspective, I'd suggest.

If you are born-rich non-working in the US, then the US Dollar is not "worth more" or "worth less" to you in any way. Non-workers don't care what it's worth. As long as they don't have to work to get by, they're getting what they want. So they'll instruct their protector, Bernanke, to represent them and inflate the monetary supply, going by the theory that there is a fixed amount of money, but it only changes hands. He aggressively promotes inflation for them, and disguises where the inflation index really is by employing his technique of "stealth inflation," where you decide how to cook the numbers, but the numbers are greatly misleading. So this way the next generation of incompetent non-workers, brood of the current gang, can then live the same life their parents were given from their grandparents by robbing the proletariat of an acceptable means in which to get by.

From the perspective of the born-indebted working in the US, your dictated income levels are none of your own choosing, by craft of the system of corruption. So accept what you are given, no more. It doesn't matter what the US Dollar is worth to you. The people at the printing press can always collude against you and manipulate the system, as it is severely so being now, under the instruction of those who deem themselves worthy to commit such horrible crimes against their brothers, but yet are of such cowardice they would never rob you blind directly, but instead will covertly rob you through a system of corruption designed for nothing other.

From the perspective of those involved in currency exchange, macroeconomic trends will dictate the demise of the authority of the US financial powers over other countries, by nature of their sheer superiority in current day economic power, and both their means and motive to depend on each other in order to unleash themselves from the wrath of American currency. The exchange rate will continue to drop until an instigator occurs, everybody smells blood, and the world altogether turns against the oppressive-natured mosquito men of the United States.

So once this country is essentially economically isolated from the rest of the world, it's up to us to be self-sufficient without stealing from other nations. That's my prediction, and I already own a baseball bat in case things get real ugly.

[Sonia Mirza]

", and I already own a baseball bat in case things get real ugly. "

LOL!


To add to: "If you are born-rich non-working in the US, then the US Dollar is not "worth more" or "worth less" to you in any way. Non-workers don't care what it's worth"

The same goes for foreigners. Try living in a country that has a currency so worthless (in the true sense) that if you travel abroad, you cannot even EXCHANGE it because every refuses to accept it. Yeah. Whether the USD is worth more or less, it is valuable in that it becomes a medium of exchange for the increasingly global resources we have... Try going to a bureau de change at heathrow and asking them to change Tanzania shillings into GBP or USD...

lol@ "Bernanke mentions "inflation is his primary concern." He is primarily concerned with inflating the money supply as much as he can get away with. Then people take on debt, and the inflated money goes to the people who put Bush and the Gang of Pricks "

keep up the good work Brian!

[Sr. Pessimist]

You know what? I'm seeing things clear now. Bernanke mentions "inflation is his primary concern." He is primarily concerned with inflating the money supply as much as he can get away with. Then people take on debt, and the inflated money goes to the people who put Bush and the Gang of Pricks into office to corrupt the laws in favor of all that insidiously-inflated money to hit their pockets. Look at where all the record profits are going. Oil, insurance, health. All they're doing is robbing people of what they need, and charging them exorbitant prices to attempt to get this stuff back. Bernanke is a real scumbag. That's why he's cooking the numbers like that. He's intentionally misleading people into what his game is really about. He's hiding how much the dollar's value is depreciating in favor of the people who benefit from his crimes. I hate Bernanke. I mean I really hate him. All those stock market increases are direct result of an inflating currency supply. The owners of the interests of the stock market are benefiting from this crime. Those are "institutional investors" and "professional investors." Just sit on their butt and swallow up a million a year for doing nothing. So the Fed is much more evil than I ever expected. They intend to let the hedge funds continue to get away with their crimes. The hedge funds are there to commit crimes against people. It's all just one big sham under the Bush Administration to destroy the lives of the workers in favor of the non-workers whom they undeniably represent in every damn thing they do.

And the central bank is in it, too. They go into national debt that you know only taxpayers (who have no say) are liable to pay, buy futures in the stock markets, and then the hedge funds leverage and maximize their capitalization. Then money the hedge funds grab then goes to the professional investors with a net worth of some ungodly amount of evilness. The reason hedge funds were allowed to leverage their borrowing so much is because they were guaranteed by the sham of the Federal Government to capitalize with profit no matter how much they invested. They're just snatching up the inflated money supply they got from Japan at low interest rates. The bank takes on debt from other countries, which is money coming literally out of nowhere, placing the immediate burden on the backs of the taxpayers, then they buy futures in the worthless US stock markets, then they communicate to hedge funds representing rich to leverage and buy buy buy, and then continue on.

Jerks.

[talktowen]

Brian,

I do agree with you on the CPI is not really showing the really inflation rate at least in my part of the town. I live in New York City and the price for rent, gas, health care, and grocery bills had went up more than 3% per year. However, you comments on how the Bernanke and Bush Adm are stealing money from the working class sounds unreasonable. How do they steal money from the working class? Is it by inflating the price of health care, gasoline, etc? Well, the price of Health care and Gasoline are driven mostly by supply and demand not by pumping extra money in the market. The gasoline price was driven up because the global demand of the product. Countries like China and India are bidding up the price for this limited resource. The cost of health care are driven up higher by things like legal insurance and R&D cost.

Is a loose monetary policy good for the economy as a whole? Your assumption is printing excessive money is bad for the economy because it leads to a weaker dollar or higher inflation, bad for the working class who's salary doesn't catch up with rate of inflation. A loose monetary policy is good for the economy as a whole for the following reasons. First, weaker dollar will lead to a more export of goods. This will create more jobs in the US and decrease the US trade deficit. Second, a loose monetary policy creates more money in the market which business can borrow at a lower cost. Businesses, home borrowers, and investors can borrow money to make more money which again create more jobs, increase in stock prices, and housing price. When investors and house owner realized their investments/house had gone in price, they will spent. It's this consumers spending creating more jobs. When the job market is tight, the wage will go up which now will benefits the working class.

BTW, China also has a loose monetary policy to avoid yuan's appreciation and protect their huge exports business. I still don't know how the Fed and Bush try to steal money from the working class. Please educate me. As the Chairman of the Fed, he's objective is to do what's is good for the economy as a whole rather than what's good for certain class of people.

[chimidanaff]

Here is a news alert for you the forex trader.
New Doha based bank Al Khaliji has opened its $165m IPO today, Sunday, and it runs until April 29 for Qatari nationals only. The bank is offering 17% of its capital, or 120m shares, with a par value of QR10 per share and investors will pay 50% of the par value at the time of application, plus 2.5% as establishment expenses. There is a maximum of 5,000 shares per person.

Good Trading.

Franka