Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
I hope by now you've had a chance to look through my Super Crash Report that I just published last Tuesday. There's a lot in there that you'll find valuable, including the clearest market forecast you can get your hands on right now.
But perhaps the most urgent information starts on page 8...
That's where I go through each of the asset classes you may own now - tech stocks, international stocks, bonds, oil, gold, commodities, currencies - and pick out which ones are going to go up and which ones are vulnerable in the months ahead as the Super Crash unfolds. I've made this extremely clear for you, and I know you'll find it valuable right away, as we continue to track the ups and downs that matter most to you.
Now I want to zero in on the one asset class that affects every other one.
I'm talking about the U.S. dollar.
Now you might think the dollar's going to crash. That makes sense. The value of all paper currencies continues to be destroyed by central banks who are trying to reduce their mountains of debt. In the United States, the U.S. Federal Reserve has piled on more than $4 trillion in quantitative easing since 2008.
But unlike other paper currencies, the dollar is in a unique position and is much more likely to get stronger.
In fact, the dollar's been getting stronger and stronger since 2014.
And if the dollar moves up through its next resistance level, it would rock financial markets.
Let me show you how to get this right. Because everything depends on what happens to the dollar.
The U.S. Dollar Affects Every Other Asset
The U.S. dollar is the oxygen of the global economy. Everyone takes it for granted, but it determines the value of every financial instrument in the world - stocks, bonds, commodities, real estate, art, collectibles, you name it.
So let's talk about the dollar's direction (up)... the forces pushing it... the consequences for investors... and what key support level to watch on the dollar index.
When the value of the U.S. dollar changes significantly against other currencies, it causes the value of these assets to change as well. And that is exactly what started to happen in June 2014. The value of the dollar is driven by monetary policy, which is set by central banks around the world. Central banks set policies that affect their interest rates and the value of their currencies.
For example, if the Federal Reserve lowers interest rates directly (by lowering the Federal Funds rate) or indirectly (through QE), it lowers the value of the dollar because investors holding dollars will earn a lower interest rate on their dollars. In contrast, if the Federal Reserve raises interest rates (directly or indirectly), it raises the value of the dollar. The same applies to other central banks - if they take actions to raise or lower the interest rate paid on their currencies, the value of those currencies responds accordingly.
Sometimes different central banks act together to lower interest rates and sometimes they don't. Right now we are in a period in which the Federal Reserve and other major central banks in Europe, Japan, and China are not coordinating their actions, which has enormous consequences for the dollar. And in turn, what happens to the value of the dollar has enormous consequences for other financial assets.
Let's take a look at how that's been playing out - and what's next.
About the Author
Prominent money manager. Has built top-ranked credit and hedge funds, managed billions for institutional and high-net-worth clients. 29-year career.