And the US Dollar?

Fed’s relentless rate hikes and accelerating QE unwind take effect.

The dollar inched up again today, one more step in a series of increases that started on April 17. It has risen 2.3% in those seven trading days, based on the WSJ Dollar Index (BUXX), which tracks the dollar against 16 other currencies including the Mexican peso and the Chinese renminbi, and it has risen 2.4% based on the Dollar Index (DXY), which tracks the dollar against six other currencies,.

From its recent low on February 16 — the lowest point since December 25, 2014 – the dollar has now risen 3.6% and is back where it had been on January 11:

After its peak on January 3, 2017, the dollar dropped nearly 12% in 14 months, dissed and kicked around by various voices in the White House as soon as they’d moved in, including Treasury Secretary Steve Mnuchin at every opportunity he gets.

This chart shows the dollar since the November 2016 election, via its recent peak in January 2017, the low in February 2018, and the uptick since:

Over the longer term, it becomes clear how the Fed’s tapering and then the end of QE in late 2014 had lit a fire under the dollar, and it began to surge, from July 2014 into January 2016. This was followed by a sell-off – enough is enough, the market said – that lasted through the summer of 2016. And after the election, the dollar surged again for two months, as part of the initial Trump bump, till January 3, 2017, before cratering for 14 months until February 16, 2018:

The Fed’s unperturbed and increasingly well-pronounced rate-hike path and the now accelerating QE unwind have pushed the US Treasury six-month yield above 2%, in an environment where the six-month German and Japanese government yields are still negative (-0.62% and -0.15% respectively). This disconnect has finally started to sink in. And it has become clear to the markets that the Fed is actually doing what many market players had said the Fed could never do: raise rates substantially and begin shedding the securities it had acquired during QE, while other central banks were still trying to water down their currencies.

This has now put a floor under the dollar.

Doubtlessly, Mnuchin and others in the White House, and perhaps even President Trump himself, will step forward and diss the dollar at regular intervals. And there are a lot of macro and fiscal concerns that could weigh on the dollar. So I doubt that it will just skyrocket from here. But I do think that the dollar has found a near-term bottom in February and will gain strength going forward, and will end the year higher than where it is today.

And so everything spikes. Read…  Update on the Most Splendid Housing Bubbles in the US

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  66 comments for “And the US Dollar?

  1. Bobber says:

    It seems like the dollar will rise in the short term because of the tightening but long term I think it can only go down. The US will be running bigger fiscal deficits than any other country shortly. A return to the money printing strategy is a huge concern. If history has taught us anything, it’s that central bankers never learn from their mistakes.

    • John M says:


      Alchemists were conjurors who tried to turn lead into gold. Yellen, Bernank et al have tried to become such alchemists. The US will discover soon enough that deficits do matter. I can’t say when but they do matter..

    • Wolf Richter says:

      It moves down against what currencies? The euro? The yen (talk about a fiscal and CB nightmare!)? The ruble?!? The renminbi? The peso?

      Sure, the dollar will lose value due to inflation. It always does. But the question with exchange rates is how the relationship with other currencies changes. So we need to look at the other currencies and figure out which, over the next few months or years, is the “cleanest dirty shirt.”

      • ptofessor plumb says:

        And capital flows???…safe haven funds in an uncertain world. The dollar appreciated 40% against the dM in the period 1979-1985 when budget deficits were growing, but compared the rest of the world the dollar seemed to be a safe haven.

      • Silly Me says:

        Which is the reason why the US is so busy destabilizing regions and countries.

        Of course, the race is on: which works faster? Will the American taxpayer go bankrupt first or the gravy train will keep running for the select few?

        Destabilization costs money that is being created out of thin air…

      • Bobber says:

        In the IMF’s fiscal moniter, they say the U.S. Is the only advanced nation that is projected to increase its debt to GDP ratio over the next five years. My point is that if the U.S. resorts to money printing to service that debt, which it probably will, I think the dollar will drop many years from now.

        Countries that don’t have fiscal deficits can’t money print as you know, although all of them will likely continue to have deficits to some degree. They won’t be as large as the US deficits though. In the US, we have lost fiscal sanity.

      • Rocket man says:

        When interest rates are perceived as peaking (two more hikes?), money will flow out of the USA. You don’t have to figure out where it’s heading. The fiscal imbalances in the US have gotten worse, so it’s almost a given. Part of the US dollar spike is due to a short squeeze.

        When the US eco stats start printing negative then we’ll see the dollar roll over. Could be many months for that to play out. The interesting thing is that gold is doing well despite the dollars rise, so people are looking beyond the current blip.

      • HBGuy says:

        Wolf, the dollar price of gold – the only money that is no one else’s liability – has risen from $20.67/oz at the Fed’s founding in 1913 to ~ $1320/oz today, or by 6,286%. That’s all anyone needs to know.

        • Wolf Richter says:


          Couple of things about your “That’s all anyone needs to know.”

          1: Nothing wrong with gold or owning it.

          2. I’m not a fan of inflation and the systematic destruction of the dollar, as you might have figured out reading my stuff :-]

          3. I wasn’t alive in 1913 and don’t care what gold or the dollar did back then. I was barely alive 50 years later, and I don’t care what happened in 1963. What matters to me: recent past, now, and going forward.

          4. Gold never earned a dime in interest over that time, whereas the dollar did (bank deposits, bonds, etc.)… and a lot in my investing life, in the double digits for many years (1970s – 80s), so this interest compensated you for the loss of purchasing power. Don’t forget to add that into the equation.

          5. Gold has plunged 31% in dollar terms from Aug 23, 2011 ($1,920) through now ($1,326). Aug 2011 was almost 7 years ago. The price is now back where it had first been in Sep 2010.

          6. You see, it’s not that simple ;-]

        • JMiller says:


          Is not silver also money, which is also no one else’s liability? Also historically over the long-term, stocks have a had a much higher total return than gold. The price return for the DJIA has risen from about 77 at the Fed’s founding in 1913, to 24311 today, or by 30,718%. That sure beats gold’s 6,286% gain. And if you include reinvested dividends, the total return of the DJIA would have been a whopping 2,388,098%.

        • ZeroBrain says:

          JMiller – why not compare gold to the Nikkei or so many others? Spain? Russia? Venezuela? Our historical returns here in the USA are an abberation – we cannot become the sole global superpower again. When you’re at the top, you can only stay there or fall.

        • JMiller says:


          Now why would I want to compare gold to the Nikkei or to Spain, Russia, or Venezuela? HBGuy is talking about the U.S. and gold in dollars and is bragging about how good gold did since 1913. I am just comparing gold’s performance to another investment which would have made you far more money.

        • HBGuy says:

          Wolf and JMiller:

          1. I do care about an asset’s performance over time, and in gold’s case, is the reason it’s long been seen as “real money”. The old adage that a good men’s suit costs an ounce of gold was valid in Roman times, in Victorian, and today.

          2. I care about the Fed’s destruction of the dollar because a 1913 dollar is worth approximately two cents today.

          3. I care about the price of gold because while other currencies are manipulated for political or economic excuses, gold’s value is timeless. The fact that the dollar was devalued 75% by St. Franklin in the depths of the Great Depression but gold held or increased its value is testimony to this. It may not be “the recent past”, but it relatively recent US history.

          4. Gold has never paid interest, but it has kept its value over time. Sort of like a zero-coupon Treasury? My intent wasn’t to comment on comparative returns from Treasuries or Corporates, but to show that gold has more than held its value against the dollar and almost every other fiat currency.

          5. Silver can certainly be considered money and is used as money, e.g., Silver Maples, Silver Eagles, etc. But it also has industrial uses that tend to cause it to swing sharply in value, as does platinum, and it tarnishes. Gold doesn’t.

          6. I’ll close by offering this advice concerning gold that was on NPR a few years ago as to why gold is the perfect monetary metal:

        • d says:

          “6. I’ll close by offering this advice concerning gold that was on NPR a few years ago as to why gold is the perfect monetary metal: ”

          Gold is not the perfect monetary metal. As soon as any nation makes their currency convertible to it, others line up to strip that nation of its gold reserves.

          As metallurgy has improved, so has the incidence of “stealing” the gold from circulating gold coins.

          Making them total impractical.

          What gold is, is a store of wealth. However at today’s grossly manipulated, over pricing, its buy price, is Untenable.

          Our family always has gold. I Inherited it and added to it a little when the buy price was acceptable. Its very usefully for opening borders that are otherwise closed to you.

          Something our people have needed to do repeatedly in the past, and may need to do again in the future.

          Also we have financed against it, on more than 1 occasion.

        • JMiller says:


          Unfortunately the old adage that a good men’s suit costs an ounce of gold was not valid all the time. Gold lost over 80% of it’s purchasing power from the peak in 1980 to 2001. A good men’s suit certainly cost more than $250 in 2001. So gold sure did not hold it’s value against the dollar for those twenty years.

        • HBGuy says:

          JMiller, I take a long view of gold. :-) And besides, I like the look, feel and sound of my Gold Maples. They make me happy, and intrinsically, I know they’ll hold their value over time.

          The daily price of gold can move up or down, and does, depending upon The PPT, Fed, Chinese and other bankster activities. I don’t pay attention to it. What matters to me is that it will always be no one else’s liability, and the number of kilos I own.

          If silver or another form of money, without liability, works for you, I’m glad for you.

      • d says:

        CHF MAY be cleaner but it is simply not big enough for the job.

        Even the GOP committees, acting like the three monkeys, and claiming no collusion, are not seriously harming it.

        cut out the noise from the pro ccp drones and objectively without bias there is still nowhere else to go, for some considerable time, probably our lifetimes at least.

        Only a fool would deny the current mood for change, objectively and realistically, to WHAT

      • Thomas R Kauser says:

        The eurodollar market will experience a event much the same as stocks did in Feb. ? On a much grander sliding scale? I.e. God gave the rainbow and man gives it back! Anything above 3.00 -3.25%_ ten year is a screaming buy! Stocks rally into parabolic nirvana? Long rates take deep dive as interest rates will never go back down?

      • Pat McKim says:

        Wolf, you’re entitled to an opinion. I agree with the printing going on it Japan, China, and Europe, (EU, Brit, and Swiss) — all with printing Central Banks. The tightening will only show that the Fed has to loosen in the future. The US is not competitive with the rest of the world. We now have huge trade and gov’t deficits. And lots of money is sloshing around. It went into the dollar for about 7 years. It has come out for about 1. Many many foreigners went into the dollar. When it was going up. It is now at a position that it can’t support either with trade or with interest rates given its debt.

        Cleanest dirty shirt. Not really. EM’s actually look much better with trade surpluses, minimal gov’t deficits and external restrictions on printing money. I agree with the developed world, but the emerging is much better, particularly now.

        Deflation assets are much higher than inflation assets; the US markets are much higher historically than other markets. The tsunami of printed money is starting to flow out of US assets, particularly hugely overvalued tech and into EM; it is also flowing out of other deflation assets and into commodities again. Commodities are more undervalued than they ever have been.

        I’d show charts, but your system won’t take them.

        The US dollar is at the end of an upcycle. It had a countercycle up in 2014. It had a false breakout in 2017. Once the dollar starts to fall it normally goes a long way. This time is no different, unless you think the US market is about to go even higher.

        The levels of debt the US has can’t stand this much longer.

        I am surprised at your position on this as this observation on the dollar goes against everything else you are saying. It could very well be given the technical end of the week that this was end of the dollar short squeeze rally.

        your observation and logic here aren’t up to your normal standards.

      • JoeM says:

        Good point & I don’t understand why the doom & gloomers ignore this point except to sell gold & silver. There’s not a prudentially supported fiat currency out there.
        Referring to your response to the gold is “All anyone needs to know” comment, you’re seemingly not a gold bug, nor so much a a doom n gloomer as a realist. Im unsophisticated & don’t/can’t do the research to figure out how to invest well and clearly the precious metals aren’t doing what their promoters say they should. So some questions to you, answer whichever seems best.
        With global QE for 10 years, what will happen to USD & the other fiats?
        Hows does one invest who is concerned of the big picture, i.e. QE, everything bubble, deep indebtedness across the board.
        How does the global & US economy revert to mean? What happens?
        Is gold/silver a good investment? What percentage of ones net worth?
        In the everything bubble, where should a working class person invest? Put there savings?

        Thank you for your intelligent sensible research.

        • Wolf Richter says:

          Let me pick this one: “In the everything bubble, where should a working class person invest? Put there savings?”

          Investors nearly across the board had it very good over the past 9 years. Almost all asset classes went up together, and many of them very sharply. And there was no diversification on the way up.

          Precious metals were one of the exceptions over the past five years. So they could prove counter-cyclical (or maybe not). I own some but have no big hopes for sharp price increases. PM cycles are very long, not years but decades. And it’s tough to out-wait a down-cycle.

          In general, I think going forward, capital preservation will turn out to be a hard thing to do for investors who have a well-diversified portfolio. All their stuff went up together, and it’s liable to go down together. But what do people expect, after 9 years of these kinds of run-ups? That it lasts forever?

    • Frederick says:

      I’m selling any rally in the dollar to be honest It’s got the furthest to fall as the Petrodollar is toast I’m not overly bullish on any fiat I’m buying more gold, finishing my new house and looking for some good farmland with water

    • Kent says:

      Deficits don’t impact the value of the currency as long as the government can borrow in its own currency. Interest rates matter.

      • Silly Me says:

        As Wolf says, inflation matters, and inflation, among other things, is driven by deficits. Currencies are valued compared to each other accordingly.

        • Kent says:

          How do deficits drive inflation? Federal expenditures are fully funded by either taking dollars from taxpayers, or trading bonds for tax dollars. There is no net new dollars in the economy.

        • Thomas R Kauser says:

          Interest on excess reserves matter and the blog more than T.P. !

      • Bobber says:

        Deficits matter if they cause the U.S. To restart QE. Deficits + QE = money printing. That would drop the USD fast if other countries aren’t doing the same. Other countries may have QE, but they won’t have deficits as large as the US as a % of GDP.

        • Kent says:

          I don’t disagree with this comment. But if we are doing QE outside of a major financial disaster (when the economy is ok), then we’ve reached a level of irresponsibility that would be extremely unfortunate.

          Heck, I’d probably go out and buy gold and I’m no gold bug.

        • Thomas R Kauser says:

          Put the navy and marines under treasury department!

    • rhodium says:

      I read Currency Wars by Jim Rickards a number of years back and so far I still haven’t seen much to contradict it, and the world still drifting in that general direction. The push of some countries to seemingly get away from the dollar as a reserve currency would of course put downward pressure on it, but at the same time our financial tightening courtesy of the fed should be providing substantial upward pressure. Of course with talk of trade wars and currency manipulators increasing over the last five years I think things may definitely be heading in the direction of currency wars especially as other CB’s have been so reluctant to concurrently normalize rates. If the dollar surges and trade imbalances with them, political forces alone could cause the fed to reverse course. Will we see a push for a one world currency grow after a period of inflation and extreme currency manipulation? Who knows, maybe it’ll even be something like an imf sponsored cryptocurrency since that is now an option. Otherwise precious metals and commodities generally should do well.

  2. DK says:

    The 10 year at 3% and the DXY looks to have bottomed. Hmmm.

  3. Fernando says:

    Dollar purchasing power has been going down for 100 years by design, why would that ever change in the next 100?

  4. Ppp says:

    The more the dollar strengthens, the fewer the number of people who have dollars. Should the regime surrender the government now or later?

  5. mark says:

    Relax everyone …. Surely we all know that the private bankers controlling
    US money supply (The Fed) and all the other honorable Central Bankers
    have only our best interests at heart .

    • Frederick says:

      Love your sarcasm there Mark Wolf May disagree with you though as he seems to enjoy being anally raped by those parasites Or is that too politically incorrect for all you left coasters out there?

      • Paulo says:

        Yeah, it probably doesn’t belong on a forum that practices basic good manners and commenting protocals. Then again, Canadians tend to hold doors open and apologize when they make mistakes so I may be biased in thinking your comment was a bit strong.

        Meanwhile, every other country who sells into the US Market attempts to keep their currency lower for manufacturing advantages and export strength. You should see the price of our food and fuel these days! ‘Beggar thy neighbour’ policies sure hurts as a remedy. Everyone.

        Of course, there are always Tariffs to use as a fix. :-)

      • LessonIsNeverTry says:

        Not too politically incorrect… just generally distasteful and uncalled for. Hopefully it gets removed. This is one of the few reasonably well behaved forums in finance and I hope it stays that way.

        • Nick Kelly says:

          I’m going to add ‘and stupid’. These ongoing childish rants against ALL actions of ALL central banks are not as clever as they think they are.

          Since all countries that even approach the description ‘developed’ have a central bank, maybe there’s something to them.

          And to add more ‘horror; they all add or remove liquidity from the system as seen fit. They all manipulate interest rates and the money supply.

          Historical but telling trivia: Benjamin Franklin was both a kind of one- man Fed and and Mint combined. When the colonies were cut off from British currency, Franklin (a printer by trade) produced notes to serve as a medium of exchange. The only alternative was barter, then as now very inefficient.

          He would ponder how much to print and then go into the next room and print it. At one point he decided he’d overdone it; writing something like ‘commerce being too brisk with prices rising’

          And to repeat: the fundamental problem for anyone running the Fed: governments that want to be popular and so spend more than they take in.

          It’s not that Bernanke or Yellen have been skimming the till.

        • ZeroBrain says:

          Nick Kelly –

          Maybe someone has been skimming the till. We wouldn’t know since the Fed is unaudited, now would we? And even if you did audit, you can’t truly verify the system without examining source code. To assume the best is foolhardy to put it mildly; we know what power does to people and the types of people it attracts.

          You know what’s hard to fake? The physical world and asset-backed currencies, because forgery/counterfeiting can be detected by inability to deliver. We don’t need to go back to barter to have a verifiable system.

  6. safe as milk says:

    yes, purchasing power will go down in the long run but as wolf points out the u.s. is still the cleanest dirty shirt. in terms of exchange rates, the dollar will go up.

    the fed is not going to stop winding down qe because they need to save the pension system which is getting killed by low interest rates.

    my prediction is that we will see massive state and municipal defaults because they don’t have a printing presses. when the banks start failing in europe, the u.s. is going to see massive capital inflows.

    • James Levy says:

      Interesting post (in a very good way). Historian Adam Tooze has done some extraordinary digging and shown that in 2008 the NY Fed discovered the extent to which European and American banks are interconnected and was horrified. What they feared most was that Europe lends almost all its dollar reserves but holds huge dollar-denominated assets. If they are hard up for cash, they will be forced into a fire sale of assets to raise dollars. This will crush the US bond market and likely the stock market as well. So although I agree that the US is screwed up but has the greatest capacity to ride out its own mistakes (my favorite analogy being what the Jacoby Ellsbury signing would have done to the Brewers or Marlins compared to its effect on the Yankees) if the European banks go down, the US is going to get hammered.

      • alex in san jose AKA digital Detroit says:

        Wasn’t the failure of German Bank Credit Anstalt, at least one of the things if not the thing, that kicked off the Great Depression?

        • Nick Kelly says:

          Yes it was the kick off, but it was the failure of central banks, especially the Fed to supply emergency liquidity to the system that caused a deflationary collapse.

          Why especially the Fed? Because the US had acquired most of the world’s gold. Rightly or not the world was wedded to the idea of gold backed currency. The Fed could have issued enough money to save at least some of the thousands of US banks that went under.

          The Fed failed to act as a central bank.

        • d says:

          Now think about all those dodgy Eu banks with massive NPL ledgersm still. 10 years after 08.

          The bullet they dodged when the FED did QE and the fact that the ECB is still effectively doing QE.

          Now the next time the Eu and ECB are staring down the barrel will the FED say Screw you. You didnt play nice last time so we wont do QE now

          Thats what P45 would want them to do.

    • Bobber says:

      I’m not so sure an increase in interest rates would help pensions at this point. I heard they are over 50% in stocks now, although I can’t confirm that off hand. Thus, interest rates increases might decrease stock prices and hurt the pension funds.

      It appears the Fed’s idiotic tactics have now forced even the most conservative investors (i.e., pensions) into the high-risk game of stock speculation.

      There’s going to be a huge taxpayer bailout down the road to cover pension losses, government deficits, student loans, and bank losses. Throw a war or two on top of that and it suggests there will be a total reset in the nature of super high income tax rates, a debt jubilee, wealth tax, national sales tax, or something similar.

      As a result, a lot of today’s wealth disparity will decline as paper wealth evaporates into thin air. It will be good for people that don’t have much money or wealth today. It will be bad for asset holders and high income earners.

      • Steve says:

        From what I read recently, the big pension funds are beginning to move funds from stocks to the long side treasuries as the yields approach 3%. This should cause some downward pressure on yields despite the feds raising rates and unloading assets. Look for the spread between short and long term treasuries to shrink.

        The problem, for pensions and insurance co, is that even if they could get 4% -6% on the long treasuries, most of their models use a 7-9% ROI which they haven’t had in over 10 years.

        Had they changed their ROI assumption to better match reality, the unfunded portion would have jumped through the roof and their EPS numbers would have collapsed, regardless of stock buybacks.

        As an ex auditor, I would like to know how the Big 4 can sign off on the pension provisions that still have these higher than natural ROI assumptions.

        Given this, I certainly would not want to be relying on a defined pension in the next 5-10 years as you may get a very ugly haircut (and this one won’t grow back).

  7. RT Rider says:

    I agree that the Fed has no choice but to increase rates. After all, a lot of pensions are on the ropes and I’m sure, more generally, that consumption of capital is accelerating, ie. savings pools are being depleted by many in order to survive. I don’t believe GDP numbers for one second, largely because inflation reporting is false, and so-called income derived from unbacked credit isn’t enduring.

    So the questions I have are, at current debt levels, how high can interest rates rise before the debt edifice is unserviceable? Will increasing interest payable across the economy be inflationary?

    • James Levy says:

      I think the logic is that when the rich and financial institutions (the so-called “market”, which is not a thing but a bunch of people) start signalling madly by selling stock and closing down firms that enough is enough, the Fed will ease off. This has been largely true in the past, so those with the money believe it will happen in the future. The question is, will it be true, or will, in a quest for “credibility”, the Fed ride out the storm “for the good of the system”?

      • Bobber says:

        It creates the prospect of an interesting show-down between the Fed, which wants to increase interest rates to reduce systematic risks, and legislators, who want to keep rates low so they can service government debt and keep fiscal deficits flowing.

        When the recession hits, I predict the Fed will back off. They’ll use the employment mandate as an excuse to end QT. If unemployment rises above 6% they may even restart QE. I have no faith in the Fed’s ability to do what is right for the long-term. That is why we are facing this mess today.

        • Nick Kelly says:

          Pretty much my thoughts. The Fed is like the business manager of a spendthrift rock star who wants to stay popular with his cult. Guess who the cult gets upset with when it hits the fan.

          However a lot of blame must go to Greenspan,who was NOT confronted with a near collapse like Bernanke but cut rates at the mere possibility of a recession. In other words he humored the rock star, instead of suggesting (fiscal) cuts instead of interest rate cuts.

          He got huge praise. One mainstream pundit said Greenspan had ‘tamed the economic cycle’
          I can still remember that and thinking ‘oh oh’.

          The idea of avoiding recessions,or small brief corrections just lays the groundwork for a BIG recession. Or worse.

          In the days of the D-Mark, German industry was once described as ‘near despair’ over the failure of the Bundesbank to intervene, lower rates and weaken the currency. (Industry muddled through and now of course luvs the euro, just not all the relatives.)

          But the Bundesbank is really independent of the gov, or as close as you can get. It’s in the German Constitution. Politicians aren’t supposed to contact it.

          At the risk of invoking a stereotype, Germans expect their central bank to discipline not just politicians lavishly spending money, but everyone else.

          Macro and micro, the society is fundamentally much more debt averse.

  8. raxadian says:

    It ain’t easy being green. And really, does anyone care about the current US president says anymore? I think a lot of people have reached saturation and only care when something actually happens besides ya know a Twitter post or a dozen.

  9. Surf@jm says:

    LMAO!…..The dollar rising in value in relation to other currencies….

    Its like a planets rate of falling into a blackhole, compared to other planets…….

    It just means the other currencies have accelerated their printing faster than the dollar at this moment in time……

    How about comparing the dollar to its purchasing power of a basket of commodities?…….. What will that tell you?………

    • Kent says:

      Well, looking at copper, it was around $3.90 in 2011 and is around $3.12 today. So deflation? Interestingly it appears to have traded in a fairly narrow range from 1972 to 2004, then took off. Not sure what happened in 2004, but it sure wasn’t QE. Bush tax cuts? Or was that earlier?

      • James Levy says:

        My guess would be peak conventional oil starting to bite. The whole process is wildly complex, but all evidence tends to show that supply versus demand for conventional oil was hitting a bottleneck starting in the early 2000s. Mining and transport costs went up. Then, the global economy tanked, central banks stepped in with vast amounts of virtually free money at zero interest rates, technologies from the 1970s to produce unconventional oil were brought online, and the Saudis started pumping like maniacs to regain swing producer power in the system. A systemic crisis was averted at the cost of pumping out even more greenhouse gases and kicking the can on that front down a decade. The results, I believe, will be disastrous.

        • LessonIsNeverTry says:

          In your last sentence what are the “results” to which you are referring?

        • James Levy says:

          To LessonIsNeverTry: those results will be secondary effects of climate change. These would include desertification, droughts, powerful storms, food shortages, and mass migrations. The best chance we had to get on top of this problem was 20 years ago. But decisions in favor of short-term growth over long-term sustainability have made any gradual process of amelioration impossible at this point. They’ll wait until they can impose draconian measures in a crisis environment so as to shift the burden down (to the poor) and out (to the Third World) at the point of a gun.

      • d says:

        china. Hoarding commodities and printing a property boom.

    • Wolf Richter says:


      Go ahead and look up the numbers. You will find that the value of the dollar has SURGED over the past 5-plus years against key commodities (oil, iron ore, etc.) and PMs (gold, silver).

      • HBGuy says:

        Gold and silver have been manipulated in the paper gold markets by the Plunge Protection Team and the Fed’s bankster proxies, HSBC and JP Morgue.

        Had there not been such manipulation gold would have soared in response to its counterfeiting trillions of dollars through QE.

        • d says:

          Gold has diverged massively from silver. silver is not being repressed gold has been, and still is, massively manipulated up by the chinese and russians, its the only way they can keep their low yield gold mines open.

          So many gold sales are russian and chinese Govt controlled/supported entities to russian and chinese state reserves. No money changing hands. but the “sales” hold the stock prices UP also.

        • HBGuy says:

          d, silver is massively manipulated by the likes of HSBC and the JP Morgue. How else do you explain the fact that the above ground supply has dwindled massively since the 2008-09 financial crisis, yet it has dropped by more than 2/3 since 2011?

          The same Plunge Protection Team and Fed Proxies that manipulate gold do far more damage to silver.

        • d says:

          “The same Plunge Protection Team and Fed Proxies that manipulate gold do far more damage to silver.”

          This is garbage.

          Gold price is heavily manipulated .

          Gold price is not manipulated by the peopel you claim.

          Silver price is not suppressed, or manipulated down.

          Silver copper lead are all relatively consistent, Gold and so Platinum, are the divergent metals, this divergence shows the extent of the manipulation.

          Silver gets dragged up by gold price manipulation, then drops away, repeatedly. hence teh return toward reality by silver in the period you mentioned.

      • Pat McKim says:

        right now financial & tech assets / deflationary assets are more overvalued when compared against inflationary and real assets than any time in history. If I could put up charts here you could see. So I guess what your saying Wolf is that trees grow to the sky. In 2000, I was in the center tech in an internet security access company and it was obvious that the situation was crazy. (This after selling my company to Macromedia two years earlier) I got out of the market. When stuff is this overstretched no rational person can support such a comparison. Gold now compared to financial assets is more undervalued that it was in 2000. But hey Wolf, maybe you should load up on more dollar / US financial and tech assets because they’ve done so well in the last 5 years. We all know that extrapolation always works and the longer a trend goes on, the longer it will continue. There are no cycles. “Bang zoom to the moon Alice!” as Ralph Kramden said. Right on Wolf. I’m right behind ya.

  10. And if the Fed does a U Turn in policy (markets think so, but then why are they still at NYSE?) the dollar will sink. If global rates start down then its the end. Of course the US is only economy raising rates at present, (LIBOR has cooled) and that rally in the dollar is a pimple on the butt of something really large. I would say the US Fed has control of the sinking ship, and populists who will want the lifeboats for themselves.

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