In historic terms, this period will be looked back on as being a major turning point for the U.S. Dollar. Over multiple decades, anytime there has been something major happening in the Middle East, Asia or Europe, money has poured into the U.S. Dollar. Over the last month, Northern Africa and the Middle East has erupted in protests and violence. Libya is in a civil war and oil output has been cut. Fears of protests and riots starting in Saudi Arabia could push oil much higher. During all of this, the Dollar has done nothing but go lower. Again, this is a historic change in character for the once mighty currency. The Federal Reserve ‘print money’ policy has killed the Dollar. Trillions of Dollars flooding the markets with no end in sight as QE-2 continues. Today, the PowerShares DB US Dollar Index Bullish (NYSE:UUP) is trading at $22.01, -0.11 (-0.50%). The CurrencyShares Euro Trust (NYSE:FXE) is trading at $138.09, +0.93 (+0.68%).
As the Dollar is no longer being bought on global instability, gold and silver have taken its place. In addition, as the Dollar is no longer a safety position and a major reserve currency other countries are willing to buy, one must assume the Dollar has a huge amount of downside in the coming years. A crash would not be unlikely 5-10 years out or sooner. Think of it like this, if countries do not want to buy the Dollar any longer, once their economies do not rely on the United States for buying goods, they will start dumping their reserves. China alone has trillions of Dollars in reserve. Once domestic demand takes over for the United States in a major way, there is no reason to hold Dollars any longer. Can we all say collapse?
It is a scary thing that is finally starting to show itself. Global instability went hand and hand with a Dollar move higher. Now the Dollar does nothing but go lower.