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US Dollar is still strong against many foreign currencies, but it is being graded on the curve

Posted by John Reed on

In spite of my forecasts that we may be on the verge of hyperinflation, the WSJ dollar index has been going up since I first started writing about inflation. When I started in 2010, it was around 73. Now it is around 93. That indicates that the value of the dollar has been going up compared to a basket of foreign currencies the WSJ has picked.
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I hasten to add that the basket is not the currencies  recommend. I think they pick theirs on market share. In other words, popularity. The WSJ index is composed of:

The bottom three of those are in my recommended currencies. The others I recommend are the AUD, DKK, NOK, and NZD. Since I recommended them, my three Pacific Ocean currencies, have fallen significantly in relation to the USD. My European currencies have stayed about the same.
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Does the strength of the the dollar disprove my belief that the USD is in danger of high inflation or hyperinflation. I think it is just that the world is grading the USD on the curve—comparing the US Fed against other central banks—rather than to an absolute standard—and operating on the inertia of thinking that the USD was invulnerable. Until 1981, probably true, Since then, no way.
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But the JPY is far worse. The EUR is almost as bad as the USD. The GBP debt-to-GDP ratio is about the same as the EU.
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CAD is a bit worse than EUR and GBP, but I have to recommend them because they are adjacent to the US on the worlds longest border. The others’ ratios are
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AUD 41%
CHF 39%
DKK 34%
NOK 37%
NZD 28%
SEK 37%
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My other point on this is although many hedges against inflation like silver and gold are now overpriced, the strength of the dollar makes foreign currency, which is also a hedge against USD inflation, a bargain.


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