Currency is a vote by the world on your country every day.
(click on the chart for a larger view)
Historically speaking, the US dollar goes to hell under Republican administrations. Does anyone actually expect it to be any different this time?
May take a while since Janet Yellen’s term has year or so to go and apparently the Federal Reserve is now determined to hike interest rates. But eventually, the businessmen now running government (who of course are totally unaware that the government is not a business) will want to debase the currency.
There is the belief that a weaker dollar enables American companies to more easily compete against competitors around the world. Maybe so. But every time I look up while the dollar is down, it is the competitors buying US companies instead of buying their products.
Oh, well, this Bud’s for you.
(right click on the chart for a larger view)
The late great Ed Hart of the old Financial News Network used to say in the financial markets “we will know everything in the fullness of time.” Well, the “fullness of time” has never been more pointed than looking back at inflection points in the U.S. Dollar as it correlates with Gold and Oil and conveniently with the administrations of Presidents..
Clearly, (on the chart below) the Bush administration was good for gold and oil (any surprise there?) and horrible for the US dollar (currency being a vote by the world on one’s country every day).
Bush’s 2002 State of Union “Axis of Evil” was to the day the exact last high for the dollar and the launch of the commodities as if the whole world heard those words and bolted the U.S. currency in alarm.
By contrast, the election of Barack Obama stopped the dollar’s decline. On a dime, so to speak… And ended the extreme uncertainties of the Mideast oil supplies, crashing the price from its Bush era $140 highs to around $50 a barrel now.
That chop-chop in the dollar during subsequent years likely was a result of the political conflicts between the U.S. President and an obstructionist Republican Congress (to the point of threatening a default on US debt), and its strength now reflects Obama’s ability to do what he wants (remarkably and ironically a benefit of being a lame duck).
One suspects the current oil drop, not only is a result of the strong Obama dollar but also is in anticipation of the the Iran nuclear deal. With international sanctions being lifted, Iran’s oil will increase supply worldwide.
History, history – in other words, as Ed Hard would say, the fullness of time.
(click on chart for a larger image)