Two Simple Charts Showing Why Dollar Bears Have Been Wrong

We constantly hear complaints that the Federal Reserve ($FED) has been “printing” too much. This is non-sense. The $FED does not print money. But don’t take my word for it, the proof is in the pudding. Take a look at the Dollar Index chart ($USDX) and the Money Supply (or Monetary Base). If the basic logic is “The FED prints, the dollar gets devalued”, then shouldn’t the dollar be much lower than what it is right now since the Money Supply has exploded?

Again, don’t take my word for it, look at the charts. From the first week in September of 2008 when the Money Supply started exploding (above 1500 Billion), the Dollar is actually slightly positive (by about 1%)! How in the world is that possible if the $FED is printing boatloads of money? In the same time, the money supply is up about ~50%. If you look at just at the monetary base, it is up 180%! Shouldn’t this have devalued the dollar?

$USDX – Dollar Index

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money Supply

 

Final Thoughts

Just because the US Dollar goes down (or up), it does not mean the federal reserve is printing too much money (because they don’t). The Dollar is just a price – which fluctuates because of $MACRO events and economic data. And don’t get me wrong, the dollar can go down because we “print” too much money (which is basically the same thing as spending). But that is done by the Treasury who controls the spending. Yes, you can bring up this chart showing how 100 cents is now worth only 3.8 cents (a 96% drop) – but I can also bring up these charts showing you how our standard of living has increased dramatically. And I can also drop stats like how REAL GDP is up ~1,264% since 1929 (the earliest the data goes).

And also, the dollar is likely to continue heading down unless the US turns into Japan (who despite massive deficits and QEs have a really strong currency) where we don’t see any growth (and thus no inflation). But I am confident the US can get back on the track of solid growth where our standard of living will continue to go up.



Tags: $MACRO $FED $USDX $DX_F $UUP















					
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment.  I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.
    
						
				  

          
    
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