Palisade Research - Thu, Jan 25, 2018

Breaking: The US Dollar Is Quickly Collapsing And Why It's Going To Get Worse

image of gold bars piled next to a shattering dollar sign

Earlier this week I wrote. . .

"Once the US Dollar Index breaks below 90 - which could happen any day now - then dollar bulls will retreat.
And it will only snowball downhill from there."

Many analysts and "expert" CNBC pundits disagreed with our bold call.

They didn't think it would happen. And if it even were to happen, it wouldn't happen this fast.

But it just did, and it was in a blink of an eye.

line chart of $DXY Dollar Index prices from January 2017-2018

The USD Index broke below 90 for the first time in years.

For a currency - especially the world's reserve currency - a 1% drop in a day is a lot.

That's why gold is up almost 2% today and quickly rushing up to $1,400/oz fast.

What's even better is silver is up over 4%.

This is what I was talking about. . .

The market is finally understanding that all scenarios lead to a lower US dollar.

Let me explain. . .

GDP - Gross Domestic Product - is basically how we measure growth in our economy.

The formula looks like this:

diagram shows GDP = Consumption + Investment + Government Spending + (Exports - Imports)

If 3 out of the 4 are negative, then GDP will be - Or vice versa.

For the last decade since 2008, GDP has averaged roughly 2% - which is what economists consider 'anemic'. . .

Now President Trump has called for 4% GDP growth - that's double the average United States current economic output.

There is no way that will happen unless there is:

  • money printing,

  • lower rates,

  • and more debt fueled consumption

All of which will weaken the dollar and cause gold to soar. . .

Let me break it down.

The United States economy is the largest consuming nation in the world - 70% of our GDP is consumption - so it's no surprise that's the biggest factor.

If citizens stop buying things, consumption declines, and it drags GDP down with it.

That's why Central Banks lower interest rates - to let people refinance their homes and current debt and have more money to go out and buy things they shouldn't.

But President Donald Trump has been calling for another way to boost our GDP. . .

And that's by boosting our national exports and government spending.

I'm sure you have heard about his Border Wall ambitions and his $1 Trillion-dollar Infrastructure Rebuilding Plan. These both require more debt and Federal Reserve money printing which will weaken the US dollar - they also need congress to get together and agree on something for once.

This option will eventually happen - and it will weaken the dollar - but it will take too long.

Therefore, the Export variable is the most important of them right now. . .

Cheapening a currency is the quickest and fastest way to attain export growth - which in turn will boost GDP growth.

That's because for the US to increase their exports, the US Dollar has to decline in value to make it more attractive for other countries to buy our goods.

This is already happening right under everyone's nose.

Look what Reuters wrote today. . .

"U.S. Treasury Secretary Steven Mnuchin welcomed a weaker dollar on Wednesday, sending the greenback reeling and underlining concerns that U.S. President Donald Trump is stepping up his attack on China and other big trading partners as part of his America First agenda."

For President Trump to put 'America First' abroad, he needs a much cheaper dollar.

And the weaker the dollar is - the stronger commodity prices are.

Especially gold and silver.

The fuse is lit.

The Dollar will keep declining over 2018.

And gold will keep going up.

I hope you're ready. . .

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