The European Central Bank (ECB) raised interest rates another 75 basis points last week. In his podcast, Peter Schiff explained how the ECB inflation fight could create big problems for the Federal Reserve and the US dollar.
The dollar index recently hit a 20-year high, so this might seem to be an odd time to talk about a dollar decline. But Rockefeller Institute Chairman and Financial Times columnist Ruchir Sharma recently wrote an article arguing that a post-dollar world is coming.
The dollar has been on a tear in recent months. Just last week, the dollar index moved from 107 to 108 with an inter-week high of 109.3. The greenback also hit parity with the euro last week. The dollar is near a 20-year high compared to the European currency and a 24-year high against the Japanese yen.
And yet we have a massive devaluing of the dollar domestically. In his podcast, Peter tries to make sense of this tale of two dollars.
The Federal Reserve is putting on quite the tough guy act. Everybody is convinced the central bank is going to keep up the inflation fight even if the economy gets shaky. In this episode of the Friday Gold Wrap podcast, host Mike Maharrey talks about the Fed’s hawkish messaging and wonders out loud if the central bankers are writing checks they can’t cash.
China appears to be chipping away at dollar dominance.
While there is no indication that the dollar is in imminent danger of toppling from its perch as the global reserve currency, more central banks are warming up to the yuan.
When I was about seven or eight years old, I remember my mom taking me to the bank to open a savings account. She explained that if I put some of my allowance in savings, that money would grow over time.
Well, that doesn’t work anymore.
Last week, I asked the question: is the US undermining the dollar’s credibility?
It appears the answer is — yes.
In another blow for dollar dominance, Saudi Arabia is reportedly considering pricing at least some of its Chinese oil sales in yuan.
Last week, we got another big jump in consumer prices with the February CPI data. Peter Schiff appeared on Fox News with Tucker Carlson to talk about the rampant inflation. He said it’s only going to get worse. Inflation only has one way to go.
Up.
The credibility of the dollar is taking some self-inflicted blows. And the world is watching.
Could this hasten the end of the greenback as the world’s reserve currency?
Jerome Powell testified on Capitol Hill last week. He said the central bank plans to hold the course on rate hikes and monetary tightening despite the global chaos caused by the Russian invasion of Ukraine. He also continued to dodge any responsibility for rampant inflation. In fact, he repeated a lie Ben Bernanke told in 2008 and insisted the Fed isn’t monetizing federal government debt because it doesn’t intend to hold those Treasuries forever. But as Peter Schiff said in his podcast, it doesn’t matter what the Fed intends to do. All that matters is what it actually does.
