Plummeting Dollar?

How many times over the last two days have you heard the word ‘dollar’ preceded by plummeting?  Given all the attention, the greenback must be down big right?  Well not exactly.  While the currency is down nearly 10% from its early June high, the US Dollar index is still up 3.3% on the year, which is actually more than 100 basis points better than the YTD return of the S&P 500.

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Comments

[CZ]

These 2 things have a naturally inverse relationship. How does it make any sense to compare their YTD performance and claim that one beats the other? It's like comparing apples and the worms inside the apples.

[Myron Martin]

Granted, some things are relative and indeed many pundits HAVE written off the dollar somewhat prematurely. The fact remains however that comparing the trend line for gold with that for the U.S. dollar since 2000 shows a disturbing reality, the U.S. dollar is in steady decline. Not only that, there is nothing on the economic horizon that I can see that would have any ability to reverse those well established trends.

The fundamentals are simple if difficult to mentally accept, gold has a 5000 year history of PRESERVING purchasing power, in contrast, paper currencies in total, not just the U.S. dollar have a history of eroding purchasing power significantly even at what are considered tame inflation rates averaging around 2% by government manipulated statistics, but REAL purchasing power is eroding faster than that.

The fractional reserve banking system based on fiat currencies has not served us well and may well be in its death throes unless the system is seriously restructured, but sadly the powers that be are reluctant to admit its shortcomings and are fighting a losing battle to preserve a badly flawed system.