USD Index Closes Week at New Low

The widely watched USD Index closed this week at 78.566, which is a new all time low for the US Dollar.

The key for the Dollar this week was the Federal Reserve’s FOMC decision on September 18th to cut the Fed Funds rate and the Discount rate by 50 basis points. The Fed might as well have hung a big flag over the entrance to the Federal Reserve Bank building with the words “we don’t care how low the Dollar goes” painted on it in bright red.

The Dollar is fast losing its friends in the world. The danger of a sudden Dollar collapse is real. The US will find that deficits do matter and that a nation that can’t control its spending, even one as powerful as the United States, will suffer the consequences of mismanaging its financial affairs.

A host of nations, including Russia, China, Japan, and Saudi Arabia are now quietly allocating additional percentages of their foreign exchange reserves away from the Dollar. The position that the US has enjoyed since the end of World War II as the world’s premier reserve currency is drawing to an end.

Americans can expect that their living standards will fall along with the fortunes of the Dollar. There is , in my opinion, little that can be done now to avoid a rapid, destabilizing decline in the value of the Dollar over the next year.

In fact with the US Dollar Index closing at a record low this week the process is likely already underway.

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