Dollar Decline: The Quiet Crisis Behind Global Markets
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these numbers are staggering, quite frankly, the share of US dollar reserves globally that are held by institutions and countries we talked about this last week on the program, talked about the petro dollar talked about the United States being the world’s reserve currency, allowing us to spend and spend and spend. Well, we’re down at levels were once at 60 %, 60 % was the share of foreign currency reserves in dollars. We’re now down at 40. And this is over this past 25 years. This is since the turn of the century, like, that’s not a big hit. Yet is yet is and the reality is it has over the past two years, it has fallen off a cliff.
again, less confidence in the US dollar as a solid asset. Now, over the past several weeks, during the course of this conflict with war with Iran, the dollar has strengthened. Again, that’s always a bit of an e-jerk reaction when it comes to conflicts globally. you overall, just over the course of the past year and a half,
the dollar was almost at parity with the euro for a short period of time and then we had liberation day and now we’re dealing with the war here where it’s bounced up a little bit. But when you spend outside of your means like we had, like we’ve been doing over the past throughout this entire century, okay, we’re what 25 and a half almost 25 and a half years in to the century.
doesn’t look so attractive anymore. This continues to drop and we talked about this again last week. I don’t know. Will it force us? Could it actually, you know, end up being an opportunity and actually force us to find a little religion here in the United States and live within our means? Maybe. Maybe. But without a doubt, there’s going to be a lot of pain that goes along with this. Go back and I think, you you want to make a
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a comparison, make a comparison, the closest comparison I can make to and again, we have obviously a very different economy. You take a look at what happened during the European financial crisis going back around 2010. And yes, these are economies that got hit that weren’t nearly as dynamic as ours and none of them again, could print money because they were all members of the euro.
we could print more money. There’s no doubt about it could help out in this situation. But again, that is hyper inflationary. Again, how do you go about handling something like this? With this? What do you do with this information as an investor? You’re an owner. You’re an owner. And one might say, well, got to own the dollar denominated assets. I don’t care what that’s relative. Okay, the dollar look at it as a
a medium of what it’s valued at as almost like an exchange mechanism doesn’t make any difference. What is that company worth? What is the value on that company? And again, by talking about it being an exchange mechanism, the dollar goes down in value and the asset that is priced in dollars is not going down in value. What do you think is going to happen? It’s obviously going to the price the asset based in dollars is going to go up.
Again, one of the things that we’ve discussed here when it talks about performance in portfolios, you’ll always have to factor in the decline in the purchasing power, the decline in the value of the dollar. Watchdogonwallstreet.com.
