US Dollar Index 1 year price chart
The above chart shows the US Dollar Index for the past year. The USDX is a good indicator of the strength of the dollar against a basket of other currencies - the biggest of which is the Euro. As you can see from the above chart the USDX has actually risen from about 77.5 a year ago to about 80.5 today. That means that the dollar is stronger now than it was a year. A stronger dollar means that a US Dollar can generally buy more of another countries goods.
So how could the dollar be so strong when the economic indicators seem to suggest it should be weak. The Fed is devaluing our dollar every month with QE3, the US national debt is increasing every month, we are probably goin gto increase our debt ceiling even more, unemployment remains high, we have an unsustainable entitlement culture, and with the reelection of Barack Obama look for all the financial metrics of the US to worsen.
Part of the reason the dollar is continuing to get stronger is because the situation in Europe is weakening. As Greece, Italy, Portugal, Spain, and most of southern Europe fails to institute austerity measures that would help their countries picture, more and more people are becoming disenfranchised with the future prospects of the Euro. They then flee to what they perceive as a more stable alternative to the Euro - the dollar.
However, I predict the dollars strength will be short lived. It may be strong compared to the Euro, but in the medium term, our dollar will still be devalued, our debt will get worse, and we will be in a generally worse situation. As long as we continue in that trajectory, more people (including Europeans) will eventually flee from the dollar and go to what has always been real money throughout history - gold and silver.
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