Gravity and the Dollar

As I predicted several months ago, the dollar is beginning to show signs of real weakness against the euro and a host of other currencies. It has the potential to happen even faster than the gradual process I originally thought it would. But what does it mean for you and your investments? Today, we are going to look at some of the implications of a weaker dollar, whether or not it means inflation or, even worse, stagflation is in our future and what the implications of a weaker dollar will mean for the Muddle Through Economy. As promised last week, we will take a pass at what all this means for interest rates, as well, so we have lots to think about.

Gravity and the Dollar

As mentioned above, a few months ago I suggested the current account deficit will take the dollar down later this year. But it seems to be happening a little faster. What gives?

Currency moves are always part perception and part gravity. By that I mean, currency traders are subject to what they perceive the various governments of the world will do to protect their currencies. If you are trading at 20…