The US Dollar Collapse

Have you heard that the US dollar is collapsing?

If you listen to the media and the “smart” money out there, it appears that our country has reached a critical tipping point.

Government deficits and debt are at record highs. Both Presidential candidates show no signs whatsoever of a willingness to cut spending.

American politics has become a punch bowl party. Politicians are willing to give away anything and everything to get reelected.

Lastly, the countries representing two-thirds of the world’s population have begun to band together to counter Western and American economic dominance.

These countries include Brazil, Russia, India, China, South Africa, and others. They have formed an informal alliance called the "BRICS," and they met earlier this week to discuss how to create an alternative to the dollar.

It appears that the end is near!

The cracks are clearly appearing in the financial asset markets.

Look at this chart of the price of gold…

This surely is a sign that global investors are losing confidence in the dollar. They are turning to the oldest "store of value" on Earth…gold.

Look at the yield on the 10-year US government bond recently. Here is that chart…

The Federal Reserve CUT rates by 50 basis points a month ago, and bond yields have done nothing but go up. Shouldn't they be going DOWN when the Fed cuts rates?

This must be a sign that the “bond vigilantes” have begun to assert themselves.

This is the concept that bond buyers (institutions, sovereign nations, individuals) are holding the US government accountable for its reckless spending.

Are we on the verge of a collapse in the US dollar? A collapse in American economic dominance?

Well, here is another chart to consider. It is the chart of the US Dollar Index.

It is an index that compares the dollar's value against a basket of other global currencies.

This is the chart for the last ten years…

Over this period the dollar is HIGHER than it was a decade ago. Although it is off its 2022 highs, it is far closer to the highs than the lows.

Here is the same chart going back to 1972…

Want to hear something surprising? The US dollar is at the SAME LEVEL that it was fifty years ago!

Does this mean that the budget deficits are ok? No. Absolutely not.

Eventually, the bills will come due for the US government, and the economic ramifications for America will be massive.

Our point is that there is little to no evidence that this is happening now. Again, we are not saying it isn’t going to happen.

What we are saying is that it could take a very, very long time.

It is (perhaps) a high probability, but it could not happen for decades.

A famous quote attributed to economist John Maynard Keynes: "The market can stay irrational longer than you can stay solvent…"

This is appropriate to this situation in some ways.

We wonder, however, how irrational is the market really being by maintaining dollar dominance?

The reason the dollar has remained so strong is that no other place on Earth is doing better. Other countries are growing less and spending more.

It is a global race to the bottom fueled by government spending and debt.

Let us reiterate – this WILL end badly!

The issue is that these types of giant economic moves can take decades. They can take centuries.

The world is a big, complicated place.

It is easy for us to take some data points and make conclusions.

Especially negative data points. Remember that negative stimuli impact us biologically eight times more than positive stimuli. We have physically evolved to emphasize the negative.

Negativity – and the collapse of the dollar – sounds very “smart.”

At HX Research, though, we aren’t here to stimulate you or sound “smart.” We are here to help you MAKE MONEY.

We will stick with the data and focus on what the market is doing now, not what it will do for decades in the future. We advise you to do the same to be a successful TRADER and INVESTOR.