The Ominous Decline Of The Dollar

 

While most of the current worries about the slowing economy under the Malignant Fascist center on the idiotic trade war he launched incoherently and vindictively, and the drop in the stock market, another related sign of trouble is the weakening dollar. From the Associated Press:

"Currencies rise and fall all the time because of inflation fears, central bank moves and other factors. But economists worry that the recent drop in the dollar is so dramatic that it reflects something more ominous as President Donald Trump tries to reshape global trade: a loss of confidence in the U.S.

The dollar’s dominance in cross-border trade and as a safe haven has been nurtured by administrations of both parties for decades because it helps keep U.S. borrowing costs down and allows Washington to project power abroad — enormous advantages that could possibly disappear if faith in the U.S. was damaged.

'Global trust and reliance on the dollar was built up over a half century or more,' says University of California, Berkeley, economist Barry Eichengreen. 'But it can be lost in the blink of an eye.'

Since mid-January, the dollar has fallen 9% against a basket of currencies, a rare and steep decline, to its lowest level in three years.

Many investors spooked by Trump don’t think the dollar will be pushed quickly from its position as the world’s reserve currency, instead expecting more of a slow decline. But even that is scary enough, given the benefits that would be lost." (our emphasis)

When you launch an aggressive and unprovoked trade war against your closest allies, imposing unreasonable tariffs on them, you can expect a loss of confidence in the U.S. government and the dollar it backs. The falling dollar against foreign currencies not only impacts trade and travel, but also interest rates for home mortgages and car loans. There's also the impact of the MF's threats against the Federal Reserve to lower interest rates:

"Trump has also repeatedly threatened to chip away at the independence of the Federal Reserve, raising fears that he will force interest rates lower to boost the economy even if doing so risks stoking runaway inflation. That is a sure fire way to get people to flee the dollar. After Fed Chair Jerome Powell said Wednesday that he would wait to make any rate moves, Trump blasted him, saying 'Powell’s termination cannot come fast enough!'” (our emphasis)

The MF's tariff debacle is rippling through the world economy, and sending the strong signal that MF's erratic policies are a good reason to question whether the dollar is as rock solid as in the past and worth their investment. The U.S.'s trustworthiness is being undermined by the MF in not only our traditional alliances but in the stability of the U.S. dollar, and it likely won't stop there.