Although the U.S. Dollar has been very stable in recent years, it is still far more robust than many fiat currencies around the world. Therefore, economists and analysts believe that the greenback will soon fall in an unimaginable manner.
Richard Mills, the owner of aheadoftheherd.com published a detailed research post on Wednesday titled “Walking Dead U.S. Dollar,” which warned that the greenback may “lose its status as the world’s reserve currency.
If you’re familiar with the financial world you’ll know that the U.S. Dollar has been on a tear. Richard Mills, an investor and owner of aheadoftheherd.com doesn’t believe the greenback’s bull market will last. The U.S. dollar index (DXY) fell in the first week of October. The Dollar Index (DXY), which had reached a 2022 peak, was lower than the 114.000 region on September 27, and saw a brief decline.
After some range bound action in the last 48 hours, the DXY was cruising between the 112.000-113.000 region on October 20, 2022. The significant losses that these currencies have suffered over the past six months is evident when you compare the U.S. Dollar’s value with fiat currencies such as the yuan and yen, pound and euro.
The blog article by Mills, published on aheadoftheherd.com, explains why the dollar is doing well, the six-months of rising interest rates and the erratic behavior that the U.S. Treasury Note and bond markets have displayed.
Mills’ October 19 blog post explains that “Rising interest rates have put upward pressure on the dollar as foreign investors pour capital into it.”
The dollar is also doing well because the U.S. is perceived as stronger than Europe’s economy, which is currently in an energy crisis. The euro dropped to 0.9903 against USD on Aug. 22, a low of two decades. In July, the New York Times reported that the dollar was at its strongest in a generation. It cited safe haven demand and inflation as well as higher interest rates and concerns about growth.
Similar to many blog posts on aheadoftheherd.com the article titled “Walking Dead U.S. Dollar” is packed with data and citations to support the claims Mills made in his editorial. Mills explains how strong the greenback is and details what it has done to foreign countries. He concludes that the U.S. Dollar is due for a reckoning.
According to the author, a strong dollar is bad news for U.S. exporters. The strong dollar weakens the purchasing power of other countries when American companies export their products. Mills explained that this results in lower demand for U.S. exported goods. According to aheadoftheherd.com, the owner adds:
The dollar can only fall so low as the world’s reserve currency because it is in high demand by countries for commodities in U.S. Dollars and U.S. Treasuries. It shouldn’t be allowed to drop too much as that could lead to the dollar losing its “exorbitant privilege”.
“We are Rushing Headlong Into an Epic US Dollar Crisis of Epic Proportions”
Mills isn’t the only one who thinks the dollar is doomed. Many market strategists, analysts and economists believe the greenback is at its lowest point. Robert Kiyosaki (author of Rich Dad Poor Dad), stated in his book this month that by January 2023, the U.S. Dollar will crash. Peter Schiff , an economist and gold bug, recently explained that the U.S. central banks face two options. Either “a massive financial crisis” or “the whole world will flee from the dollar.”
Mills, a financial writer and investor, believes that there will be an economic crisis and the greenback losing its status in the international currency arena. “I believe that we are heading straight into a U.S. Dollar crisis of epic proportions. Mills wrote on Wednesday that the dollar could lose its status of the world’s reserve currency in the next five years. Mills also argues that Jerome Powell, the Federal Reserve, and the Federal Reserve won’t be able to bring inflation down below 2% without raising the Federal Funds Rate (FFR).
“Arguably, the Jay Powell Fed won’t be able to bring inflation below its 2% target without increasing FFR significantly — likely into the double digits. Mills questions his readers: “How high can rates go?” and “How strong can the dollar get before the rest of the world ‘cries uncle? Mills adds:
Will Powell make the same mistake as Volcker and run the economy to the ground by raising rates? Given the importance that the Fed places on not only taming inflation but also maintaining the dollar system, it seems likely. Mark Twain said that history does not repeat itself, but it rhymes.