aheadoftheherd.com owner Richard Mills published a detailed research paper Wednesday titled “Walking Dead U.S. Dollar“, warning that “we are rushing headlong into a US dollar crisis of epic proportions“. The investor believes that in the next five years, the greenback could very well “lose its status as the world’s reserve currency“.
Richard Mills talks about the loss of the exorbitant privilege of the dollar.
If you’re familiar with the world of finance, you probably know that the U.S. dollar is on a steady rise and Richard Mills, the investor and owner of aheadoftheherd.com doesn’t think the greenback’s rise will last. During the first week of October, the U.S. Dollar Index (DXY) recorded a brief decline after reaching a high of 2022, above the 114,000 region on September 27.
On October 20, 2022, the DXY is holding between 112,000 and 113,000, after moving in a range over the past 48 hours. Comparing the value of the U.S. dollar to a variety of fiat currencies such as the yuan, yen, pound, euro, and the Canadian, Hong Kong, and Australian dollars highlights the significant losses these currencies have suffered over the past six months.
An article written by Mills and published on aheadoftheherd.com explains how the dollar is doing so well, the last six months of rising interest rates, and how the short and long term U.S. bond and Treasury markets have shown erratic behavior.
“Rising interest rates have put upward pressure on the dollar as foreign investors pour capital into the country“, details Mills’ blog post on October 19. “The dollar has also done well because the U.S. economy is seen as stronger than Europe’s, which is suffering from an energy crisis“. On August 22, the euro fell to 0.9903 against the dollar, its lowest level in two decades. The New York Times said in July that the dollar was the strongest it had been in a generation, citing safe-haven demand, inflation, rising interest rates and concerns about growth as factors.
Like most of the articles on the aheadoftheherd.com blog, the article entitled “Walking Dead U.S. Dollar” is replete with quotes and data to back up Mills’ claims in his editorial. After explaining how strong the greenback has been and detailing what it has done to foreign nations, Mills says he believes the U.S. dollar is “ready for a judgment“. “Just six months into the Fed’s tightening cycle, developing countries are defending their own currencies against the soaring U.S. dollar and trying to prop them up by selling Treasury bonds and dumping the dollar“, Mills writes.
The author adds that a strong dollar is bad for American exporters. “When U.S. companies sell their products to other countries, the purchasing power of those countries is weakened by the strong dollar. The result is a decline in demand for U.S. exports“, Mills explains. The owner of aheadoftheherd.com adds:
Conversely, the dollar, as the world’s reserve currency, cannot go any lower, as it will always be in high demand by countries that buy commodities priced in U.S. dollars, as well as U.S. Treasuries. It must not be allowed to fall too far, as this would risk the dollar losing its “exorbitant privilege”.
We are running headlong into a U.S. dollar crisis at the “epic proportions“.
Mills isn’t the only person who thinks the dollar is doomed to fail or face a crisis, as many market strategists, analysts and economists have pointed out that the greenback is on its last legs. For example, Robert Kiyosaki, author of the best-selling book Rich Dad Poor Dad, said this month that the U.S. dollar will collapse by January 2023. Economist Peter Schiff recently explained that the U.S. central bank is faced with two choices: either “a massive financial crisis” is to be expected, either “the world will flee from the dollar“.
Investor Richard Mills believes that an economic crisis and the loss by the greenback of its status in the global monetary arena will occur. “I personally believe that we are rushing headlong into a U.S. dollar crisis of epic proportions. In fact, within the next five years, the dollar could lose its status as the world’s reserve currency“, Mills notes in his blog on Wednesday. Mills also argues that Jerome Powell and the Federal Reserve will not be able to bring inflation back into the 2 percent range without significantly raising the federal funds rate (FFR).
“Arguably, Jay Powell’s Fed will not be able to get inflation back to its 2% target without raising the FFR significantly – probably into the double digits. How far can rates go, and how strong can the dollar get, before the rest of the world ‘screams uncle’?“. asks Mills of his readers. He adds:
Will Powell make the same mistake as Volcker, driving the economy into the ground with rate hikes? It seems likely, given the Fed’s emphasis not only on controlling inflation, but also on maintaining the dollar system. Mark Twain is famous for saying, “History does not repeat itself, but it does rhyme.”