The U.S. Dollar Is Destined To Move Higher

As counter-intuitive as it may seem to many, I believe the world-wide desirability to own the much, maligned U. S. Dollar is destined to rise. To my mind, the recent upside break-out of the U. S Dollar Index is a major event and confirms my belief. It is driven by conditions existing beyond the borders of the United States that are destined to worsen. The result will be the flight of large sums of foreign capital to the U. S. and the dollar. This will likely be a temporary phenomenon, but its effect will be widely felt.
There are numerous reasons that would lead one to expect a weaker dollar. Yet, reality overwhelms what we may or want to believe! In this case, the United States is in better financial and economic condition than most other major countries. This positions the U. S Dollar to become more desirable to many foreigners, than their own currencies. The economic, political, and social problems facing the other important nations are currently far more serious than those we are experiencing on American soil. All that is needed is a triggering event to set into motion massive currency flows to the dollar.
Japan has joined the E. U. and others. It has embarked upon yet another period of monetary easing in their effort to improve their economy. If they fail, the consequences can be damaging on many fronts. Numerous European banks are questionably solvent and a banking crisis may be unavoidable. Italy just announced it will bail out one of its largest banks, Monte dei Paschi di Siena. Both houses agreed to use 20 billion euros to save its banking industry. One must wonder from where they will get the money, and if that is enough. India’s government cancelled their 500 and 1,000 rupee banknotes, and severely limited gold ownership for its citizens. They instituted these changes allegedly to fight corruption. However, these actions may lead to a global trend as country after country will likely initiate these or other acts to achieve at least two goals. The first is to punish those who are hiding untaxed money from them. The second is to accumulate gold, possibly with the intent to use it for future backing of their currencies.

This post was published at GoldSeek on Friday, 23 December 2016.