I remember the heady days of 1984 and the middle years of the Reagan administration. I was in Vancouver on business and when I exchanged my U.S. dollars for Canadian dollars I got a third more money. That’s right. The U.S. dollar, at least in Canada, was worth $1.33 to every $1 U.S. dollar. Not bad. Today it is worth $1.31, which is back up from a few years ago when the U.S. dollar and Canadian dollar were about equal. The dollar is obviously worth more in other countries, like Mexico, where it is ten times the value of the peso. But 1984 does represent the highpoint of the U.S. dollar in my lifetime. Robert Wenzel of the Economic Policy Journal made the following observations on the dollar:
The dollar’s appreciation has “peaked,” the chief economist at Danish investment bank Saxo Bank, Steen Jakobsen, told CNBC this morning.
“We’re having a perfect storm for the dollar,” he said.
Jakobsen is probably correct in his forecast, but for the wrong reason. He sees a weak US economy driving down the dollar. In my view, it is the massive amount of dollars held by foreign investors and the massive amount of new money printed by the Fed since the 2008 financial crisis.
These are the factors that will ultimately put massive pressure on the dollar. Recent dollar strength, in the big picture, is only a blip up in a long-term dollar decline.
The Empire can not afford to spend money the way it does. All such Empires collapse. but it does take time, decades.
From the long perspective, the dollar peaked a long time ago, in the 1980s. If anything US government spending and money printing has only accelerated, which are, of course, the ultimate drivers of the dollar collapse.
Keep the chart [above] in mind, when short-term dollar strength causes you to think the dollar is some kind of super currency. It is not.