Watching The USD Drop? Here's What You Should Really Be Watching

The USD vs the JPY is weakest in years. Yes, the DXY dollar index has been hitting new lows around 74. Yes, US government debt and deficits (the 2 infamous “D”s) have been skyrocketing and are projected to keep on growing in the coming years.
Yes, the printing presses started by Ben Bernanke might be running faster than most people are comfortable with. And yes, the coming inflation will lead to further devaluation of the dollar which the government will not attempt to stop because they are happy to inflate away their piles of debt.

We’ve all heard the reasons for the demise of the US dollar. But here’s the bigger picture. The USD does not exist in isolation in the forex markets.
Every USD exchange rate that is quoted is RELATIVE to other currencies. The US dollar will depreciate relative to other currencies in the long term, if and only if, fundamental conditions in the US are RELATIVELY MORE worse than in other major economies.
And probably the most important currency cross to RE-consider is the USD-JPY, which has recently touched 10-year lows.

Worried about the US debt burden are you? There is enough reason to be – the debt-to-GDP ratio is projected to rise from 65% to 80%.

The ageing population in the US is going to stress the social welfare programs which will cause deficits to rise even further. But you just might be worrying about the wrong deficit.

Here’s a reference point – Japan’s debt-to-GDP ratio at the end of 2008 was 173% (trumped only by Zimbabwe at 241%) and is forecasted by the IMF to rise to 200% by 2010.
Japan’s population structure is now so lopsided that its death rate per 1000 people exceeds its birth rate (despite having one of the world’s highest life expectancies), and Japan hardly benefits from the growing young immigrant populations that the US enjoys. As a result, Japan’s population has been declining since 2007.
Let’s talk about social welfare. The US has fewer and fewer people in its workforce that are available to support the growing pool of retired citizens. In 2009, this ratio stood at around 4.5 working age citizens for every person above 65.

The stock market hasn’t been going up in real terms. It is only going up as the dollar goes down (staying basically even against dollar value).

This ties in with the writer’s argument. We live in a global financial market now, albeit with various stock exchanges which specialize in certain geographical areas. The value of US companies is balanced against companies in other countries, not against dollars. So prices adjust to reflect changes in dollar value. Your pay grade just went up!

People have a disturbing tendency to look at half an equation lately and so extrapolate a useless answer. Example, FED printing? People predict inflation. That’s only half the equation. The printing is a tiny fraction of the wealth destruction experienced, so the real thing to fear for now is deflation. The FED knows this, which is why they are printing and keeping rates low. Also, if the FED raised rates by 1%, $600 billion a year in interest payments would be added to the deficit. That equates to a 5% reduction in GDP. The FED can’t handle that, and neither can the rest of us. So, rates stay low for now, which means dollar weak unless other countries get weaker faster. The bet is that other countries will get weaker faster than the USA. It’s a pretty good bet against most countries since we are the largest consumer in the world.

It’s similar to the arms race that sunk the Commies.

The FED and the administration is counting on the dollar to stabilize soon due to weakness in other nation-state economies. Will the gambit work?

Let’s look at my big black 8-ball, give it a shake...and the little piece of paper floats up that says-—

“Answer unclear.”

But at least your pay grade is up!

“Answer unclear.”

But at least your pay grade is up!

The answer is very clear: IMPOVERISHMENT.

Regardless of the relative values of currency, the material state of the US citizen can only descend, albeit at a rate dependent on other nations productivities, because global dependence intractably couples this nation to the resources of others, who all live significantly below the US standard. Chasing fluctuating relative currency values, intellectually or monetarily, is in the long term meaningless, and in the short term is nothing less than pinning George Soros and the Left to the ground and beating the crap out of them. That is to say, the short term is an ugly matter of the elitist playground.

Zimbabwe can print money or it cannot print money. Japan can print money or it cannot print money. The US can print money or it cannot print money.

One can have a lot of money that is worthless, or have no work and have no money. But inflation and deflation are two forms of the same thing, IMPOVERISHMENT. And any savvy but deceitful government can manipulate the statistics to show inflation or deflation, depending on the algorithms used, just like the unemployment ploy. And any savvy but deceitful corporation can manufacture a bar of soap one ounce less and charge the same without the stupid houswife knowing it. I mean Rahm Emmanuel is a truly evil person, but he ain't dumb.

Like a Freeper commented the other day, my computer bill is going down but my food bill and taxes are going up; is that inflation or deflation?

The ONLY way our real material prosperity (which includes leisure) can increase is through increased development, or efficiency, of energy; it's a thermodynamic thing, because material civilization (not spiritual civilization) is thermodynamic. Physicists have been through that a long time ago.

That incidentally is the US ace in the hole. And Sarah Palin knows it. But the Left, worldwide, and we are talking about really sinister calculating people will try to shut that down like a flyswatter. That is what the scam on anthropogenic CO2 emission is all about.

Of course we (the US) can work like dogs and try to outproduce the Chinese, and Japanese, and Germans, and Indians, so that the world's needs looks to us. But given our education system, our student body, lying politicians, our whining feminist juveniles, that ain't going to happen, and is hardly what one would call prosperity anyway.

Johnny Suntrade

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