US Dollar Devaluation Prediction for 2015
A debt crisis has taken the western world by storm, but few seem to be sounding the alarm. The U.S dollar, the go-to currency for global economic stability and growth, is imploding at an unprecedented rate.
Profit Confidential editors have been critics of the U.S.’s inability to reign-in government spending. Based on the White House’s own figures, the national debt will reach $20.0 trillion by the end of this decade—about 140% of our current gross domestic product (GDP).
Historically, countries that have incurred considerable debt and consistent national debt-to-GDP multiples of 120% or more have experienced currency devaluation. The U.S. dollar has been in a free-fall against other major world currencies since 2009.
You have to print money to make money. No one knows this better than the Federal Reserve. Since November 2008, the Federal Reserve has initiated three rounds of quantitative easing (QE) in an effort to create more economic activity and increase home prices.
What have three rounds of QE accomplished? It was supposed to increase lending, create more jobs, and lower the unemployment rate. Instead, banks are sitting on a pile of cash and remain tight-fisted, fewer jobs have been created, and the real unemployment rate remains high.
What QE has done is flood the global markets with trillions of U.S dollars. It’s not as if this new-found money is backed by gold. It’s simply created out of thin air.
What’s keeping the U.S. economy afloat? The Federal Reserve has artificially propped up the U.S. economy by buying a majority of the government debt issued by the Treasury department. As a result, the U.S. government has become dependent on borrowing (creating money) to finance itself.
At Profit Confidential, we expect the U.S. dollar to devaluate as the U.S. continues to pile on the debt. You can find regular commentary on the U.S. dollar in Profit Confidential.
According to the Congressional Budget Office (CBO), the U.S. budget deficit will grow from three percent of gross domestic product (GDP) today to six percent of GDP by 2040. (Source: Congressional Budget Office, June 16, 2015.)With the CBO expecting GDP in 2040 to be $31.4 trillion, six percent of that number would equate to a budget. Read More
Oracle Corporation (NYSE/ORCL) shares are falling after the company posted a larger-than-expected drop in sales, signaling the company is struggling to adapt to the changing technology landscape.On Wednesday, June 17, Oracle reported its fourth-quarter earnings and revenues that fell short of Wall Street’s expectations.. Read More
The U.S. dollar was broadly higher against a basket of other major currencies on Tuesday, June 16 as traders wait on the Federal Reserve’s monthly policy meeting.As of 10:30 a.m. ET, the U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.24% to 95.04.. Read More
In the first four months of this year, January to April, prices in the U.S. declined by 0.2%. But this shouldn’t be a reason to jump to the conclusion that deflation will prevail for the U.S. economy. (Source: Bureau of Labor Statistics, last accessed May 31, 2015.)Probability of Deflation in the U.S.: ZeroThe Federal Reserve Bank of. Read More
On Tuesday, May 19, the euro fell almost one percent against the U.S. dollar. This was mainly due to a top-ranking executive at the European Central Bank (ECB) signaling that the central bank will increase the pace of its bond buying. (Source: Financial Times, May 19, 2015.)The ECB has embarked on quantitative easing (purchasing bonds). Read More