Thursday, July 28, 2011

Dollar looking extremely vulnerable

Check out this monthly chart of the US dollar index. The dollar formed a triangle pattern over the last few years. Triangles are continuation patterns and considering the dollar's 90% fall since 1971 it's not hard to imagine the trend continuing lower. This pattern points to an almost 50% further reduction in the value of the dollar over a number of years. We don't have to get into politics or any economic debates between Austrians and Keynesians outlook on the debt debate and the dollar. All I have to do is look at this chart and have a good understanding of history to realize that the dollar is in trouble and no one, including Bernake, Obama, Geithner, or Superman is going to save it. It was not caused by one political party, but both, as they all had a part in destroying our economy over the last three decades with insane policies that encourage the build up of debt and the creation of one of the largest wealth gaps in the history of the world. Yes, I said it..... Ronald Reagan and Bill Clinton share in this ginormous policy failure that is the US two party system.

Also.... Just so we are clear. A 50% reduction in the value of the dollar is not going to be the end of the world if it does materialize. Gold bugs, doom and gloomers, religious zealots, and Fox News would have you believe that if the dollar loses it's value all hell is going to break loose and we will be taking hunting rifles with us to the grocery store. This is just absolutely not true, so quit lying to yourself and others. The dollar falling is what the economy needs to reset itself. It's a natural correction process that needs to happen to rebalance the excesses of the last 30 years and bring manufacturing back to the US. If you disagree with me feel free to e-mail me as long as you have a rational response not memorized from Fox News or any other propaganda machine.

US Dollar Index (monthly)

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