ANALYSIS AND COMMENTARY
With the new paradigm in American news reporting, it seems like many stories that would have garnered significant coverage — for instance during the Obama Administration — are just going entirely unreported by the mainstream media in this country now.
I mean specifically the devaluation of the U.S. Dollar since Trump took office again.
While the unfortunates who don’t understand how our monetary system works are probably cheering as they see the price of gold going up-and-up, they also must be blissfully unaware the reason has to do with their dollars being worth less-and-less every day.
Historically, the relationship between gold and the U.S. dollar has been exactly inverse, meaning gold prices tend to fall off as the dollar strengthens, and they go up when the dollar declines.
According to financial experts, that’s because gold is seen as a best global store of value, and a solid hedge against inflation, especially amid economic uncertainties.
For this reason, international buyers and investors consider it one of the safest assets.
According to a report from Marketplace.org in early July, the U.S. dollar had dropped 10 percent in value since the beginning of the year.
That’s worst slump faced in a single year since the national leadership crisis of 1973, according to historical data.
Marketplace’s Mitchell Hartman reported that “The U.S. economy is still a good investment, if you look at growth and high interest rates, but investors are rattled by high tariffs and high deficits.”
The report goes on to state that the U.S. Dollar Index, which measures our currency against six other major currencies, showed a precipitous drop.
Everything Affects Everything Else
According to economists, devaluation is a primary driver of inflation, making imported goods more expensive and increases overall demand — known as a cost-push and demand-pull effect.
According to some estimates, the degree to which devaluation impacts inflation also depends on factors like a country’s reliance on imports, the strength of its central bank’s policy and responsiveness, and the overall health of its economy.
According to some estimates, a 10-percent devaluation can increase prices by 2 or 3 percent — and, in economies with high import dependence or weak monetary policy — inflation can accelerate even more quickly.
On a related note, Reuters reported last Wednesday that New York Federal Reserve President John Williams signaled the time is drawing near for the central bank to restart bond purchases as part of the technical effort to maintain control over short-term interest rates.
Behind all of this unrest in the financial markets is a steady stream of news regarding the Trump Administration’s trade wars and tariff talks, along with their efforts to shake up the Federal Reserve command structure.
Regardless of the machinations behind it all, the economy is feeling the pinch of having more than a million jobs disappear in the United States this year, with some experts estimating the total closer to 1.1 million near the end of October.
According to historical data, this represents the highest number of job cuts since the pandemic plunge of 2020.
It’s also a 65-percent increase over the same period last year.
Key sectors impacted include government, technology, and retail.
According to financial experts on Monday morning, the 43-day-long government shutdown delayed several key governmental reports, including data on imports and exports, which are expected to be scrutinized closely when released for insights into how Trump’s tariffs are impacting trade.
1 Comment
“Historically, the relationship between gold and the U.S. dollar has been exactly inverse”. Um, no, this is a misleading assertion. They tend to move in opposite directions, yes.
Draw the graphs showing the whole scale, not just a section that seems to prove your point. Gold is up almost 50% since Jan 6 according to the graph. The dollar is down about 6% in the same time frame. If you measure from a month earlier (the start of your graph), gold is up almost the same but the dollar is down closer to 3%.
The bigger question is why did it the dollar run up then come down? One news article I found said this: “The dollar has gained on expectations for Trump’s policies to potentially stoke inflation, which would force the Federal Reserve to keep interest rates elevated to counteract higher prices.” Higher interest rates or expected higher rates will drive up a currency. Lower rates will drop it. Blame big money for the dollar runup then slide, including foreign governments selling US debt and buying something else with the proceeds.