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DOLLAR GAINS, WORLD PAINS: U.S. Dollar is Losing and Danger is Getting Worse

Breaking News Jul 26, 2022

On one hand, I keep telling you that the dollar is dying as well as all the other Fiat money. On the other hand, what does Wall Street keeps telling you? How “strong the dollar” is? “The dollar is so strong” Well, that is what we’re going to talk about in this video.

CHAPTERS:

0:00 Chief Market Analyst
1:33 Dollar Doom Loop
5:44 Performance Against the Dollar
9:33 Corporate Profits
15:00 Asia’s Dollar Index
16:15 Spot Gold Market is Manipulated
19:36 The Safest Monetary Asset

TRANSCRIPT FROM VIDEO:

Now I keep telling you that the dollar is dying as well as all the other Fiat money. So that’s the one hand. But on the other hand, what does Wall Street keep telling you? How strong the dollar is? “The dollar is so strong” Well, this is what we’re gonna talk about today. Coming up.

I’m Lynette Zang Chief Market Analyst here at ITM Trading, a full service physical gold and silver dealer, specializing in custom strategies. And you really need to have a strategy because quite honestly, if I hadn’t been doing this for as many years as I have, I wouldn’t know what was going on anymore. Then most of the other people out there, including many in, well, I won’t say it, but including a lot of people out there, because the reality is if you listen to Wall Street, what you hear is how strong the dollar is. So the dollar gains are world pains!

Because, if this is the dollar, as the dollar gets stronger, the other currencies get weaker and back and forth and back and forth. And that’s the way we’ve been trained to think about gold. And we’re gonna be talking about that as well. But this piece, this could be the start of a dollar doom loop, like no other and inside of a doom loop. Let me, let me show you what that looks like when you have the stronger dollar against other currencies. That’s what they’re really talking about with a stronger dollar. Then you have lower global manufacturing because as we know so much debt is taken out in terms of dollars, even though those other countries or corporations don’t earn dollars, they earn whatever the local currency is, but then they have to repay everything in dollars and that makes it more expensive. So you have lower global manufacturing, lower commodity prices, copper steel oil, etcetera, lower global trade worries about global growth, which then, miraculously, because I of course don’t do this. I don’t make that choice. But the perception is that the dollar is a flight to safety asset. It’s insane. And so if people are worried about global growth, like they are right now, then they rush to the perceived safety of the currency of the dollar. But you really have to ask yourself, is the dollar really all that safe? Because it really isn’t. And I’ll show you this. As we go through. The U.S. Currency, when investors are worried, they tend to rush to the safety of dollar denominated assets, sending the currency even higher. That’s one reason why the dollar surge, when markets crashed in March of 2020 and why it’s been strengthening now. So it’s not because there’s really any good reason other than entities. People are looking for a safe Haven. What you don’t realize is that you’re fleeing from the frying pan into the fire. Gold is the only true safe Haven monetary asset. But what makes this version of the doom loop really scary is it’s kind of hard to see how those circuit breakers play out over the near term and so what he’s actually talking about is, well, the dollar gets stronger and then other countries come in and intervene in the strength of the dollar. But right now with the world, a wash and inflation and global central bankers really battling or raising rates to battle the inflation they created with all their money printing. Okay? So we have European problem, which creates pressure on the Euro, which sends the dollar higher, right? Because if this is the Euro, this is the dollar when that gets weaker, the other gets stronger, which worsens the manufacturing cycle, which does the whole thing again. But is the fed going to pivot with spot inflation at an eight handle? And actually it’s at a nine handle, is the fed going to say, okay, let’s weaken the dollar? No, because it actually helps. When we import goods and our dollar is stronger, it makes those good look cheaper to the U.S. Public. So it it’s kind of good or perhaps helpful for inflation. Central bankers are out of tools and they, and there is declining confidence in them. Actually, there’s only one vestige of confidence left and that’s the public.

So one way to value a currency is Fiat to Fiat. So let’s take a look at that because that’s what a strong dollar really means. What does it mean to the rest of the world? Here you have Brazil and the blue. So they’ve actually made gains against the dollar, but everyone else in this picture has had losses against the dollar, stronger dollar weaker, other currencies and vice versa, right? Most currencies are indeed weaker against the dollar. Now here’s the piece though. Every country that has a large liability in dollars is a cause for concern. So again, you have governments as well as corporations that has taken out debt in terms of dollars when their currency was stronger against the dollars. So then that made that debt cheaper to service, but now the reverse has happened. So when they have to go out and buy dollars to service that debt, it makes that debt a whole lot more expensive. So you have a bunch of emerging markets. Let’s take a look at, this is the performance year to date. Okay? And then this is the dollar debt as a percentage of GDP to all of these emerging market countries. And this big one, by the way, is China. So I’d like you to see that this is all negative. If the zero’s here, this is all negative down there. Here’s Brazil up here. Okay. Only Brazil. The Brazilian real and Brazil is experiencing insane inflation as well is stronger against the dollar, making their dollar denominated debt cheaper to service. If I were them, I’d be buying the Hades outta dollars now and getting rid of that debt. But it’s not up to me. And not only that, but there is a double whammy brewing. So now you’re dealing with a stronger dollar, but what else might we be dealing with? Well, I don’t know.

This is the dollar against a basket of currencies. And as you can see, it is a lot more expensive to buy the dollar a lot more than it’s been. Well, this graph goes back to 2006 and even way before then. So when was the debt taken out? Because if it was taken out anywhere in here, or actually anywhere, even in here, it’s more expensive to service now, as the dollars is strengthened, but at the same time that you have the strong dollar, you also have global interest rates going up. So, you know, amongst all of these other countries and every time you see like this stair step, that’s when they’ve raised interest rates and there’s Brazil, Brazil has been aggressively raising their interest rates as have other countries. So Brazil, right now, their currency is stronger against the dollar, which is why I said, if I were them, I would be retiring all that dollar debt while it’s this cheap. New debt, more expensive to buy dollar denominated debt, as well as interest rates, double whammy, we are in for a rash of defaults, make no mistake about it. There’s a lot of debt that needs to be rolled over. It’s rolled over at this higher rate. And if it can even be rolled over and also rolled over, they have to retire that other dollar denominated debt. It’s a mess.

But corporations “dollar ate my profit.” So we’re in the middle of earning seasons and it’s pretty abysmal for a lot of corporations, particularly those multinational corporations, foreign exchange, FX, Foreign exchange impacts cited by 2018 S&P 500 firms in the latest earnings call. About 35% of U.S. Firms have enough exposure overseas that a stronger green back, a stronger dollar materially hurts their earnings per share because so much of their income is earned overseas. So you’ve seen this graph many times. These are the corporate profits after taxes, and I’ve shown you this as well. You see how that’s flattening out right in there? So the corporate profits are being hurt for a number of level reasons, but this is 2020. This little gray line here is 2020. And what should be very apparent to you when you look at this graph is how important corporate profits are to the central banks. That’s really who’s benefited in this K-shape recovery, as they call it. And many say, I had to put this in this is a survey, many say that businesses using conditions to increase their profits. So the public’s perception well, and rightfully so, look at these corporate profits. Did your income go up like that? Your profitability, did it go up like that? No. All that new money printing, really, it went to the top, just like it did in 2008, they gave pennies to the masses. They gave trillions to the corporations and people noticed that. So 49% believe corporations are taking advantage of economic conditions to increase profits. Yeah, they are the inflation. We’ve talked about this before, where they haven’t just passed through costs. They’ve passed through and added on costs. And I guess that’s okay.

But the surging dollar stores market buzz of a 1980s style Plaza Accord, where the dollar had gotten really, really strong, really what’s important in here is the reference to when we were transitioning into a new system, because I don’t hear anybody on Wall Street, the CNBC, those talking heads, Bloomberg, etcetera. I don’t hear any of them talking about the transition and monetary system that took place, because they don’t wanna bring that to your attention, but I’m talking about it. I’m bringing it to your attention because every time they reference back to that period of time, that’s what was happening. We were transitioning from at least a quasi gold back system into a full debt based system controlled by the central banks and the central banks. I mean more and more I’m reading how they, how all of their money printing is getting blamed for this inflation, as it rightfully should! That inflation, If you’ve been listening to me for a while, you know, darn well, all of that money printing inflation was held inside of the stock market and the bond market and the real estate market. Those markets that they openly and overtly targeted for reflation, but you know, it was artificial. And so now we’re all gonna be paying the consequences of it.

But through this 1985 agreement, major nations drove currency down. They all intervene in the currency markets. It’s easy to do inflation fed hikes of today. Echo what happened back then? Like, I don’t know, a transition from one financial system into another financial system? Yes, because as I said, when the dollar goes up, the other currencies go down it’s Fiat to Fiat and you can certainly see that. But back in the eighties, France, Japan, the UK, the U.S. and West Germany agreed to weaken the dollar, a stance taken out of a belief that the dollars huge move higher was damaging the global economy. And that’s what they’re talking about now, because of all of that debt that’s been taken out in terms of dollars, but you’d have to have the U.S. agree to that. And as I pointed out a little bit earlier, a strong dollar makes imports less expensive. So it actually helps people’s pocket books. So do I think that the U.S. Is going to agree to that this time? I don’t know but what I do know is this, the entire world’s currency is shifting and we are going into a new monetary system no doubt about it.

Unstoppable dollar risks, worsening 71 billion Asian stock exodus. What I think is really interesting is this extreme correlation, excuse me. So the green is the Asian dollar index has a strong relationship with the region stocks, this little turquoise line here. That’s the correlation it’s directly correlated. Asia’s dollar index has a strong relationship with the region stock. The dollar is strengthening because there’s risk aversion rather than growth. And that’s not a good mix for Asian assets, frankly. That’s not a good mix for any assets. The dollar is not getting stronger because it’s worth that much more. Just like whatever you’re buying at the store. Are those eggs worth that much more money? Or is it the dollar worth that much less? I mean, seriously, it’s just garbage. It’s not real. So it’s not a really good mix. We are in a very volatile, very, very shifting circumstance right now.

Gold rebounds from near 11 month low as dollar retreats, because what we’ve really been expected, what we’ve been groomed to expect is the dollar strength and then gold weakness. But you’re talking about the spot gold market, which is just a contract. And as I’ve shown you over and over and over again, very, very easy to manipulate. It doesn’t take very much money. It doesn’t take barely any effort at all. So don’t believe the lies don’t believe them real physical gold is all intrinsic value. It has the broadest base of buyer. It has the broadest base of utility. The dollars are only used in one area, the financial markets. So, you know, I’ve had so many people say, “whoa, you can’t eat gold.” You going to eat dollars? You going to eat this? No, but where this always loses confidence and we are on the verge. I can’t exactly tell you the exact moment that all confidence will be lost, but we are declining the public confidence in the systems in the central banks, in the governments it’s declining in the news media, etcetera. Let’s take a longer term view though, because short term, you see one thing longer term, you see a completely different thing. The blue area is the spot gold. The red area is the U.S. Dollar. And so as they’ve been actually kind of barely making it sort of, kind of stay in a range, you see spot gold going up and up and up in terms of those dollars. That is a more true picture of what’s really happening, but it’s still the spot gold market. The real trend, the real trend is that purchasing power trend. And this is the same length of time that you’re seeing this graph and this graph. And you can see, do you notice how much more quickly we’re seeing a decline in purchasing power? So strong dollar, it buys you less and less and less and less until frankly it will buy you. Absolutely nothing. You better have gold. You better have silver because the long view I mean, it reveals more of the truth than just looking at one little piece and we’ve been taught to go shorter and shorter and shorter and shorter. 15 second, Hey, if it’s 30 seconds ago that that’s ancient history. No, it’s not. You have to have the ability to look back in order to see what is likely ahead of us, because history has a tendency to repeat itself.

And the other part is, is well gold. It has, you know, doesn’t pay interest, right? Well, it doesn’t have to pay interest. It’s the safest thing that you can do. But hawkish monetary policy from top central banks has pushed gold, which bears no interest to its worst quarter in over a year. It doesn’t have to pay you interest. It’s the safest thing that you can do. It is the only form of money that runs no counterparty risk. What’s counterparty risk? Well, look, what’s happening in Europe. If you’re counting on Russia to provide energy to you and Russia says, Nope, that’s counterparty risk. You better be able to be energy independent and monetary, money independent. That’s what gold really is. Gold is the safest monetary asset. Therefore it doesn’t have to pay you interest. Meanwhile, India, the world’s second biggest bullion consumer raised its basic import duty on gold to 12.5% from 7.5%. Gee, you think they want the population? Not just in India, but all over the world. Do you think they want you to stay away from gold? Mm-Hmm <affirmative> why? Why, why would they care? Because when gold is in your possession, it becomes invisible to them. It’s not easy for them to take it away from you. So they’re going to do what they can to discourage you. One way is via the markets. Gold, hasn’t done anything. Gold is going down. Look, they’re buying it hand over fist. So should you.

You need to have a plan. And so if you haven’t already set that up, just click that Calendly link below and make an appointment to talk to one of our consultants so that you can set up your own individual plan because it is critical to get that done right now. I mean this week on Thursday, I’m discussing the consumers, losing confidence in the central banks because really Wall Street has lost confidence, Bank of England, Federal Reserve and the ECB.

They’ve all given away that Wall Street confidence in them. And you know, truthfully, it is so critically important that you are as independent and self-sufficient as possible. We recently opened the Beyond Gold and Silver channel so that wherever you are in your planning stage, you can be as independent and self-sufficient as possible. So if you haven’t already make sure you subscribe and click that button so that we’ll let you know when we’re going live. Leave us a comment. Please give us a thumbs up and share, share, share, because without a doubt, it is beyond time to cover your assets and here at ITM Trading and as a foundation for everything that you’re doing, you need good money and that’s physical gold, physical silver in your possession. And until next we meet, please be safe out there, bye-bye.

SOURCES:

https://www.bloomberg.com/news/articles/2022-07-17/this-could-be-the-start-of-a-dollar-doom-loop-like-no-other?fromMostRead=true&sref=rWFqAg1Y

https://www.wsj.com/articles/what-a-strong-dollar-means-for-the-rest-of-the-world-11658482200?mod=trending_now_news_5

https://fred.stlouisfed.org/series/DTWEXBGS

https://fred.stlouisfed.org/series/DEXUSEU

https://www.bloomberg.com/news/articles/2022-06-13/-dollar-ate-my-profit-is-corporate-america-s-lament-once-again?sref=rWFqAg1Y

https://fred.stlouisfed.org/series/CP

https://www.bloomberg.com/news/articles/2022-05-18/surging-dollar-stirs-markets-buzz-of-a-1980s-style-plaza-accord?sref=rWFqAg1Y

https://www.bloomberg.com/news/articles/2022-07-17/unstoppable-dollar-risks-worsening-71-billion-asia-stock-exodus?fromMostRead=true&sref=rWFqAg1Y

https://www.bloomberg.com/news/articles/2022-07-18/gold-steady-near-11-month-low-as-traders-weigh-dollar-s-strength?sref=rWFqAg1Y

https://stockcharts.com/freecharts/perf.php?$USD,$gold

https://www.cnbc.com/2022/07/01/gold-markets-us-treasury-yields-interest-rates.html

Thumbnail Photo We believe that everyone deserves a properly developed strategy for financial safety.

Lynette Zang

Chief Market Analyst, ITM Trading

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