Daily Gains Letter

U.S. Dollar

A debt crisis has taken the Western world by storm. But few seem to be sounding the alarm. The U.S. dollar, the go-to currency for global economic stability and growth, is imploding at an unprecedented rate.

When the financial crisis began in 2008, the U.S. national debt stood at $9.2 trillion. Based on the White House’s own figures, the national debt will reach $20.0 trillion by the end of this decade—about 140% of our current gross domestic product (GDP).

Historically, countries that have incurred considerable debt and consistent national debt-to-GDP multiples of 120% or more have experienced currency devaluation. The U.S. dollar has been in a free fall since 2009 against other major world currencies.

You have to print money to make money! No one knows this better than the Federal Reserve. Since November 2008, Federal Reserve Chairman Ben Bernanke has initiated three rounds of quantitative easing in an effort to create more economic activity and increase home prices; printing off approximately $3.0 trillion.

What have three rounds of quantitative easing accomplished? It was supposed to increase lending, create more jobs, and lower the unemployment rate. Instead, banks are sitting on a pile of cash and remain tight-fisted, fewer jobs have been created, and the unemployment rate remains high.

What quantitative easing has done is flood the global markets with trillions of U.S. dollars. It’s not as if this new-found money is backed by gold. It’s simply created out of thin air.

In essence, the U.S. Federal Reserve, in an attempt to save the U.S., has ravaged and devalued the U.S. dollar. In the process, it has also eroded international confidence in the U.S. economy and greenback.

What’s keeping the U.S. economy afloat? The Federal Reserve is artificially propping up the entire U.S. economy by buying a majority of the government debt issued by the Treasury Department. As a result, the U.S. government has become dependent on borrowing (creating money) to finance itself.


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