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Dollar’s Reign May Not Last Much Longer (If History Is Any Guide)
Dollar’s Reign May Not Last Much Longer (If History Is Any Guide)
Chart of the Week #6
Today’s chart ties into the de-dollarization trend we’ve been talking about a lot lately in these pages.
When most people around the world think about money, they’re probably thinking of the U.S. Dollar. That’s because the greenback is the world’s primary reserve currency. This, of course, is in no small part thanks to its dominant role in global oil trade.
But the U.S. Dollar hasn’t always held the throne. If you look at the graph below, you’ll see that the history of the world’s reserve currencies began with the Portuguese Real in 1450 (and has continuously shifted from one currency to another since then).
This coincided with the Age of Discovery in the 15th century when Portuguese navigators like Vasco da Gama opened new sea routes to Africa, India, and Asia. Portugal’s expanding maritime empire and colonial territories gave it control over key trade routes and access to plenty of gold and silver.
For centuries that followed, those who dominated commerce and had the most gold made the rules. Unlike today’s U.S. Dollar, these currencies weren’t fiat abstractions; they were literally made of precious metals or backed by them. They were money.
And so, around 1530, the Spanish took over, followed by the Dutch about a century later, and then the British, all the way to the Bretton Woods Conference in 1944. That’s when a new system was established (solidifying the dollar’s global dominance that began after WWI), tying almost every nation’s currency to the U.S. Dollar at a fixed rate… and the dollar to gold at $35 an ounce.
Alas, the dollar’s tether to gold wasn’t meant to last.
…click on the above link to read the rest of the article…
The Fed’s Dovish Twist – Only Surprising on the Surface
The Fed’s Dovish Twist – Only Surprising on the Surface
Rate Cuts, Money Printer Go Brrr, and Biden
“The Federal Reserve is not only too big to fail, it’s too big to be held accountable.”
~ Thomas Massie
Last week at its Federal Open Market Committee (FOMC) meeting, the Fed made it clear that it will go back to stoking inflation.
Leaving the Fedspeak aside, here’s the gist: The Fed wants to cut interest rates three times this year, each time by 0.25%, with the goal of reaching a range between 4.55% to 4.75%.
That’s the plan for 2024. But the Fed’s expectation is to lower them even further in 2025 and 2026.
Now, this is quite a turn… and quite an odd one at that in terms of the timing. First, you’ve got the stock market recently hitting all-time highs. Gold and Bitcoin are also hovering near their all-time highs.
And hold on a second, isn’t the Fed supposed to be fighting inflation? Didn’t it come in pretty hot recently?
It did.
The PCE (or Personal Consumption Expenditures) — the Fed’s preferred gauge for measuring inflation — jumped by 0.4% in January, hitting its fastest pace in almost a year.
The inflation report for December was not great either.
Leaving aside the fact that the whole core PCE thing is a sham because it excludes food and energy (the two things Americans depend on the most), the Fed, being all “data-dependent,” is shrugging off the data it doesn’t like.
Alright, that’s pretty noteworthy on its own, but that wasn’t the only jaw-dropping news from the Fed last week.
It came from Fed Chair Jerome Powell himself, who suggested that the central bank could ease quantitative tightening (QT) “fairly soon.”
…click on the above link to read the rest of the article…
