tl;dr summary: The USD will strengthen. Recession in the US approaching over 90% within the next 12 months. Lots of rambling info within.
Multiple indicators are already signaling that we're heading into one. When it hits the US properly it is hard to say*. Maybe 2-3 years at most? To be quite frank though, based on various events and the fact that most economic data goes through a public sector statistics bureau, I'm inclined to think reality is much worse than governments are reporting. Can't prove this though, of course. It's speculative.
With respect to the USD, the trend has been one of strengthening, not weakening, and this is borne out by the fact that in contrast to 2007, the recession is starting outside the core (periphery of American Empire) and spreading inward to the US. The reverse was true in the Financial Crisis, where the core of the empire was affected first (subprime mortgage crisis) and radiated outwards. Right now the US is carrying the global economy, it is the last man standing, and that is why (amongst other things, like Crimea sanctions in 2014) the capital is fleeing back to the US. There are other factors like FACTA [
en.wikipedia.org] , as well as just the general realization by institutions that:
1. The US capital markets are deeper than any other markets globally.
2. Most of the world's billionaires and ultra-wealthy have a high degree of exposure to US markets still out of a lack of alternative.
And thus, the only real conclusion is, betting on a weaker dollar/USD collapse, is betting simultaneously against 95% of all sovereign wealth funds, all billionaires, all investment funds etc.
Upward trend is clear here on Bloomberg's USD index, their index peaked in Dec. '17 (after Trump was elected) and has retraced, largely because Mnuchin has been talking the USD down in conjunction with Fed Reserve action (leading markets to expect interest rate increases and then reversing position).
Today will be an interesting day since it is Jackson Hole (central bankers getting together) meaning there will be a statement later. Contrasting the popular narrative from various gold and silver promoters that increasing interest rates will destroy the US economy, an increasing rate in a world of low yield actually means the reverse. It means capital inflows into the US. Keep an eye. In addition there is, in fact, upward pressure on interest rates also in the form of overall market risks, and inflation.
I expect the USD will probably start to strengthen within the next 30-90 days, but the trend will picked up going into 2018-2020 by the average investor/media pundit. Reasons to think this is likely:
1. German election in Sept.
2. US Debt ceiling coming to a head in the next 30 days.
3. Dutch govt. coalition still not formed (longest coalition talks since the 1960s)
4. European banking crisis looming.
5. Brexit related issues ongoing.
6. Italian elections going into 2018
7. Migrant crisis still going strong in Europe in Spain, Italy, Greece (but swept under the rug**.
And none of the Emerging Markets are particularly strong either. Europe is likely to be the epicenter for the next crisis, but it could be China. Nothing goes up for 40 years unabated without pressures in the opposite direction building- this applies to China. Europe is the largest economic bloc in the world, and the Euro is the only alternative to the USD, but the Euro is configured like something out of a dystopian novel. It's a monetary aberration***. Thus, no one is going to back the Euro over the USD.
*The average time between recessions is approximately 8.6 years, going back over the last 500 odd years of data. 8.6 years from 2009 parks us in the 2017-2018 range (roughly). Now of course, you could argue there is some variability in the frequency of economic recessions, and there is, it is true. Even so we are now in the 3rd longest economic expansion in US history and the growth rate has been sluggish at best. We are currently 9 months shy of bypassing the 2nd longest.
**The Germans don't want to absorb these flows with the election on the cards but after next year Merkel is going to throw open the floodgates again if she's still in office. And I think the German voters know this.
***This is a classic case of government trying to have their cake and eat it. The Euro is designed to provide all of the benefits of a single currency to the Germans with none of the detriment- none of the burden that they would have to bear in federalizing. As a result it is intrinsically unstable and will either break apart or need major reform. I don't see the political consensus in Europe for reform right now. It's more likely to lead to a civil war, especially if the US pulls out, which they are prone to do over time (refocus right now in the pacific arena) and the German govt. militarize. Also likely.
As an aside, the Polish Foreign Minister suggested using immigrants to form up an EU army. This sort of 'solution' to the 'problem' of populations not consenting to political will is insane. Foreign mercenary armies have committed some of the largest atrocities in human history against the citizens during times of unrest. [
www.telegraph.co.uk]
Edited 7 time(s). Last edit at 08/24/2017 09:45PM by istirith.