Being Specific About Dollar Specifics

It may sound like a distinction without a difference, but this isn’t a small variation of theme. After having tried to push a flood myth into every corner of the globe, in dollars, due to bank reserves, these currency values put such ideas to rest. It never happened. It was claimed to have been the most severe bout of money printing – digital dollars – ever conceived, yet economies like currencies struggle still below the most basic levels.

That leaves then mostly “stimulus” via other forms. In the US and Europe, government spending along with the vaccine breakthroughs. Again, the response in euro was far and away greater than the response practically everywhere else. From Mexico to Brazil to India (key currencies that I watch with particular interest for inside indications about eurodollar conditions), there was a post-vaccine push but nowhere like it has been between dollar and euro.

And in any wider context beyond just 2020, it’s actually small, too (even in the euro, the move over the past six months isn’t dollar crash-y, either; see below).

The dollar shortage baseline might seem quite difficult to find these days. Even in the Treasury market, the jump in yields over the last week has hyped up the proclaimed prospects for the contradictory BOND ROUT!!!! which has so often accompanied the DOLLAR CRASH!!!! over the last decade plus. The inflationary fires of money printing and reckless government spending have grabbed all the headlines the past few months.

Yet, the dollar doesn’t corroborate. The euro only kind of does.

Instead, what we find outside the euro (and pound, the Brexit twins) is an unusually slow relaxation from the most extreme squeeze posture back around March. It got really bad for a spell (made unnecessarily so by QEs), but then, curiously, it’s been very, very slow to recover. That’s all that has happened between then and now; the big squeeze has eased off a little bit at a time.

Here’s the thing – it hasn’t gone away. And that leads to the big question everyone should be asking: why hasn’t it gone way? Why isn’t the dollar at least normalizing more quickly to the lowest possible standard, the first hurdle, which would be getting all these currencies that aren’t European back to where they had been before March?

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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