Will the Dollar Crash?

This article will dive into the question on whether the dollar will crash as so many have predicted over the years. What it will point out is what I wrote about in my book Illusions of Wealth, that all fiat currencies eventually go to zero. Why? Because governments screw them up. But for now, the dollar is still king of the world. Let’s dive into the dollar crash potential a bit deeper.

First let’s take a look at what gold and silver are doing since my last few posts.

Here are the titles and dates of my last 4 articles dating back to September 27, 2023 (before that I hadn’t written an article on gold as there was no reason to hash out what I have said for years by repeating it again. I simply put a free copy of my book Buy Gold and Silver Safely out to the public so they could see what I see.

Current price of gold 4/10 just after higher CPI data, 2341.50

Current price of silver 4/10 just after higher CPI data, 28.11

Dollar bounced to 104.73 up .58 on the CPI data

Stocks fell hard with /ES (S&P 500 Futures at 5191 presently.

September 27, 2023 Single Digit Daily Sentiment Index for Gold and Silver Signals Bottom Is Close

Price of gold 1824.50 up 28.33% since then

Price of silver 21.24 Up 32.34% since then

October 4, 2023 The Emotional Gold and Silver Investor

Price of gold 1823.00 up 28.44% since then

Price of silver 21.12 Up 33.09% since then

December 4, 2023 Gold and Silver Pullback Is Your Last Opportunity to Buy Low

Price of gold 2034.30 Up 15.10% since then

Price of silver 24.58 Up 14.36% since then

February 1, 2024 Why You Should Have 50% of Net Worth In Gold Today

Price of gold 2054.90 Up 13.94% since then

Price of silver 23.22 Up 21/06% since then

Daily Sentiment Index (DSI) lets us know if an asset is overbought or over sold. Historically, the closer we are the 90s the more overbought an asset is. The closer we are to single digits, like I alluded to on September 27th, 2023, the more oversold an asset is.

DSI readings as of close 4/9/24

DSI hit 88 for both gold and silver as well as the CRB Index and oil.

 

Silver hit 91 last week and I wrote a note on Seeking Alpha to consider lightening up on leverage.

 

Was hoping for a stronger move into the 90s for both gold and silver and it still may come. 88 is pretty strong and we are getting up there in RSI (Relative Strength Index) at over 70 for GLD on the daily. Historically when we hit 70+ on RSI we get a retreat. I noticed a few gold and silver mining stocks dip below 70 on RSI already. SLV never got to 70+ RSI.

 

At this point in time, it doesn’t matter what price does. Any dip we get, which I have been saying for years, buy more. We’re not selling for a long time and I’ll try and guide you as to when to even think about selling. Remember, for many, gold and silver are insurance against government (with the help of the Fed) abuse of the monetary system. Gold and silver can sit at 90s DSI for quite awhile as price stagnates or moves a bit higher. Silver is still by far undervalued of the two as it is just over 85% from its all time high of 50. Think about that! Silver is still a bargain basement prices! You can put your IRA money to work buying silver now versus an overvalued stock market that is due for a major correction sometime this summer and beyond the election. Call 888-604-6534 to discuss.

 

Will the Dollar Crash? 

 

Let’s dive into the dollar and see what this currency is all about. For many, you’ll look at the dollar and its potential to crash a little bit different after reading. It won’t shy you away from buying gold or silver, and if you can understand that all currencies for the most part are floating in a ship called the Titanic, you’ll see that the only lifeboats are the rising price of gold and silver against ALL currencies.

 

Does the dollar price matter much? It’s been around 104 for the DXY (Dollar Index) for a long time while gold has shot straight up. It’s part of the Illusion of Wealth I speak of. Gold takes off in all currencies while the currencies battle it out priced in each other not revealing the weakness of all currencies. The U.S. dollar still has some military power behind it and of course the Fed intervention when needed. Despite the US being the world’s largest debtor nation, and that alone being a ticking time bomb, everyone is glued to what the Fed does and other currencies have been overall weak. Unknown by most, the Fed also has 6.852 trillion of debt on their balance sheet (SOMA System Open Market Account Holdings of Domestic Securities) that no one ever discusses. They have been reducing this number each month but small amounts. What happens when the Fed has to buy everything under the sun again, which they will? Their debt is added to the US National Debt bringing us to over $40 trillion of debt owed.

The total market capitalization of the U.S. stock market is $50.8 trillion. You’re telling me that somehow the biggest spenders in the world, the U.S. government and the Fed are even thinking about paying this debt off? With higher inflation, higher interest rates to be paid on the debt (imagine what happens when we go to double digit interest rates again???), and future obligations like Social Security, Medicare and the multitude of other government subsidies, and the influx of handling millions and millions of those crossing the border, we know the government and Fed will keep printing more and more fiat dollars. As Richard Russell says, “Inflate or Die.” Death of the dollar is not an option as you’ll see next.

 

To understand this reality or fantasy, I provide once again a funny video when the national debt was $14 trillion. It was funny then and today while I still laugh at the video because of the great actors in it, it’s a sad sad state of affairs for our government and the Fed in trying to tackle this ticking time bomb of debt and pretending that no other potential crisis is heading our way (we get one about every 10 years). Here is the video. https://www.youtube.com/watch?v=Li0no7O9zmE

 

This is what makes up the Dollar Index

 

 

 

The DSI for many of these currencies shows we could get a bounce in them and thus a decline in the dollar

Yen 10 DSI and has been low for awhile but Japan is finally raising rates a hair.

15 Canadian dollar

Euro been around 30 to 40 of late.

25 Swiss franc off the low.

British Pound hanging in there at 59-64

 

DSI for the dollar is 75 presently.

 

That’s what makes up the dollar (no DSI data for the Swedish Krona which makes up only 3.6% of the dollar. It would probably be around 50 DSI.

 

By definition, for the dollar to “crash” it would by default cause the majority of the above currencies to sky rocket. That’s just not going to happen.

 

The reason why it won’t happen (to the majority of the currencies that make up the dollar, the Debt to GDP of these nations is also high versus the U.S. at 129%

 

Definition Debt to GDP  The main takeaway from this definition is:

• The higher the debt-to-GDP ratio, the less likely the country will pay back its debt and the higher its risk of default, which could cause a financial panic in the domestic and international markets.

Japan 264%

Canada 107%

Euro has 112% for Spain, France, Portugal, 142% Italy and 66.1% Germany

Pound 91.7%

Switzerland 41.4%

Sweden 37.4%

 

See how collectively they are near the same situation the dollar is in?

 

Side note:

 

17.2% debt to GDP for Russia. 78.4% Ukraine 7.4% for Afghanistan. 77.1% China 85% Iraq 43.4% for Argentina who has seen their Peso go from 50 to the dollar to 850 to the dollar in about 4 years. Greece 173% India 89.2% Philippines 60.9% Australia 22.3%. Mexico which has had a nice run in the peso is 49.6^

 

For the dollar to crash it would need one or two US military and Fed failures. But both of those entities, the military industrial complex and the Federal Reserve are still relevant today.

 

September 2008 I wrote the following article: The Fed Is Relevant…. For Now…. However…..

 

In that article I wrote the following:

 

The Fed will continue to bailout anyone as long as people still believe they are relevant. At some point, this “belief” will disappear. We all know what will happen next. We won’t like it, but hopefully one is prepared. I think this will only be strike two. In 1929, the stock market crashed but the dollar was still around.

But in 1933, the government needed to confiscate the People’s gold to prevent them from becoming insolvent. Bernanke has praised this action in his past speeches. The last thing our government and the elitist politicians that want to stay elitists want, is for any type of Sound Money or Honest Money system. What will their choices be if push comes to shove? We all know “they” can confiscate any and every “thing.” This will be strike three for the Fed.

While so many others since 2008 have called for a dollar crash, I’ve been giving the Fed as much credit as I could because of the printing press comments from Ben Bernanke long ago in 2002.

 

Like gold, U.S. dollars have value only to the extent that they are strictly limited in supply. But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.

 

If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.

 

The Fed has had a nice game going for so long as the dollar today is still the world’s reserve currency since the 1944 Bretton Woods Conference where 44 countries pegged their currency to the U.S. dollar which at the time was convertible (not publicly) to gold at $35 an ounce. This was supposed to prevent currency wars. That failed as of 1971 when Nixon took us off the gold standard and allowed currencies to float against each other and the IMF to step in with loans where needed. Anyone the U.S. doesn’t like to work with, they sanction them (see Russia) and cut them from dollar transactions. But things are changing there a bit.

 

While the Russian Ruble originally sank with the US sanctions over Ukraine issues. It then shot to new highs but has come back under those highs since and lower than before the conflict started. Wars wear on any country and it’s wearing on the U.S. and Russia too along with money sent to the Middle East conflict. Whether it the CIA or the US Military Industrial Complex, there is an agenda to control the world and keep the dollar where it is, the world’s reserve currency. One can’t discount that. But again, pricing currencies in other currencies is just an illusion and the actual price of gold and silver moving higher and higher is the reality. Real money. Constitutional money. “Weights and Measures” money. But there are others who want to separate themselves from the U.S. dollar and something to keep an eye on.

 

The BRICS countries, Brazil, Russia, India, China, and South Africa, which potentially could peg their currencies to the price of gold (Zimbabwe just did by the way), has structural challenges with their central bank and monetary policies make this difficult. They wouldn’t buy gold mind you but just price the currency to gold.

 

But no other country has the capacity to dethrone the dollar as the world’s principal reserve currency as of now. No one is even close.

 

However, there are cracks in the dollar supremacy theory. The International Monetary Fund (IMF) basket of currencies (Special Drawing Rights or SDRs) used to have the dollar at 59% and today that has dropped to 43.38%. The Chinese Renminbi used to be 2% and today is 12.28% The Euro is at 29.31%.  Why is the dollar percentage make up of SDRs falling? Because we overextend ourselves in conflicts around the world using most of our wealth to fund a military industrial complex where most Republicans and Democrats approve the budget each year collectively. Congress is in on this dollar survival game but they deplete our wealth and add to our debt in the process. This is a recipe for disaster. So that article I wrote about the Fed being relevant, “for now,” is changing before our eyes. They are becoming more and more irrelevant. They have been talking about lowering rates as inflation data (and price of oil moving higher) shows they still should be raising rates. What planet are they on? 3 more cuts this year talk is nonsense. The dollar though did get stronger with this data. Higher rates mean more are attracted to the dollar.

 

Some may say crypto currencies like Bitcoin will dethrone the dollar. El Salvador made Bitcoin legal tender. But the CFR article says that in times of a crisis, and because of the volatility of crypto currencies, it becomes a problem. Blockchain is also an alternative they are working on. Don’t think for a second the creators of the Federal Reserve, the ruling elite, aren’t cooking up something to replace the dollar when the time presents itself. Government is already looking at regulating the crypto market and you know they will favor what the banks want in this regard.

 

Jamie Dimon, CEO of Chase bank, and the nations leading banker, has called crypto a “fraud,” “pet rock,” and said bitcoin was “a little bit of fool’s gold.”

 

For me, I look for the time tested gold and silver metals and true Constitutional money as a means to maintain my purchasing power. and care not what game currencies are playing with each other, what the Fed does, what our government does or what crypto does. While one can trade cryptos like one can trade stocks, and more power to you, we can’t expect the government to allow competition to the dollar. Gold and silver are left alone. It’s such a small amount of the investment pie that they ignore it. CNBC ignores metals. But the only thing you need to know is this when it comes to metals and purchasing power and this has been true no matter what the dollar does.

 

A  90% silver 1964 quarter could buy me a gallon of gas in 1964 and 1965 and can still buy me a gallon of gas today with the national average at $3.619 as that quarter exchanged for the scrip of the day, the dollar, is presently valued at $5.08. California because they tax the heck out of gasoline is $5.38 a gallon but the next highest state is Washington at $4.65.

 

A 1965 quarter buys you 25 cents worth of gas. This is what the government has done to our money. This is why you own precious metals. That money you have sitting in CDs earning whatever it earns is the 1965 quarter. It won’t keep pace with the Fed, government abuses to the monetary system.