In the midst of massive stock, bond, and real estate bubbles, there’s often little headline mention of the price of the dollar. But in case you haven’t noticed, it’s been getting pounded this year.
With the stock market up over 10% on the year, many have been left with the impression that the economy is strong and all is well. But the dollar market tells a different story, as it has lost over 10% of its value, at least as measured in the less than perfect U.S. Dollar Index (which compares the dollar against the other major paper currencies).
The crypto currencies have also exploded as measured against the dollar, or perhaps more appropriately the dollar has crashed as priced in Bitcoin. And while some may or may not view cryptos as an accurate barometer of dollar strength, to see the dollar lose so much of its value as measured by Dollar Index that most on Wall Street use is simply stunning.
Stunning, although not surprising given that Steve Mnuchin, the treasury secretary of the nation that produces what’s currently used as the world’s reserve currency, even openly talks about wanting a weaker dollar. And so far he’s getting his wish.
Beyond some of the pricing action is also news that “China recently announced they will trade oil for yuan “backed” by gold,” as well as the host of other geopolitical events that have led many to be concerned about the future of the dollar.
How close we are to an actual break point, similar to what was witnessed in 2007-2008 is still unknown. Although the trading action in the dollar is the kind of indication worth keeping an eye on.
Because we’ve entered that phase of the bubble cycle where extreme moves could really begin to happen at any point in time, with or without another final warning.