US Dollar Update

The US Dollar is at an interesting juncture at this point. Every central bank of virtually every country on the planet, including the US, has tried to weaken the value of their currency vis-a-vis everyone else in order to get a competitive advantage in the international markets for good and services. We think that this is a misguided policy. When the value of a currency falls, the market value of assets in the affected country goes down, reducing the wealth of the citizens of their country. Yes, with a weaker currency companies have a price advantage in international markets, but this advantage is temporary. The price of imported goods rises and since economic activity is juiced by increasing the money supply, prices rise. Inflation eventually erases the advantage and companies that invested to meet this demand find they have excessive, productive capacity and a recession soon follow, along with some corporate bankruptcies.

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