While the U.S. dollar has been extremely robust in recent times, compared to a myriad of fiat currencies worldwide, a number of analysts and economists think the greenback will eventually falter in an inconceivable manner. The owner of aheadoftheherd.com, Richard Mills, published a comprehensive research post on Wednesday called “Walking Dead U.S. Dollar,” warning that “we are rushing headlong into a U.S. dollar crisis of epic proportions.” The investor thinks that within the next five years, the greenback could very well “lose its status as the world’s reserve currency.”
Richard Mills Discusses the Dollar Losing Its ‘Exorbitant Privilege’
If you are acquainted with the financial world, then you probably know that the U.S. dollar has been on a tear and Richard Mills, the investor and owner of aheadoftheherd.com, doesn’t think the greenback’s bull run will last. During the first week of October, the U.S. Dollar Index (DXY) recorded a brief dip after reaching a 2022 high, above the 114.000 region on September 27.
DXY on October 20, 2022.
On October 20, 2022, the DXY has been coasting along between the 112.000 and 113.000 region, after some range-bound action during the last 48 hours. Comparing the U.S. dollar’s value to a variety of fiat currencies like the yuan, yen, pound, euro, and the dollars of Canada, Hong Kong, and Australia highlights the significant losses these currencies have seen over the last six months.
U.S. Treasury Note (10-year) on October 19, 2022, via Marketwatch and aheadoftheherd.com.
The blog post 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 short and long-term U.S. Treasury note and bond markets have shown erratic behavior.
“Rising interest rates have put upward pressure on the dollar, as foreign investors pour capital into the country,” Mills’ blog post details on October 19. “The dollar has also done well because the U.S. economy is perceived to be stronger than Europe’s, which is suffering from an energy crisis. On Aug. 22 the euro fell to a two-decade low of 0.9903 against the dollar. The New York Times stated in July that the dollar is the strongest it’s been in a generation, citing safe haven demand, inflation, higher interest rates, and worries over growth as factors.”
Akin to most of the blog posts on aheadoftheherd.com, the article called “Walking Dead U.S. Dollar” is jam-packed with citations and data to back up the claims Mills makes in his editorial. After explaining how strong the greenback has been and detailing what it has been doing to foreign nations, Mills says he believes the U.S. dollar is “due for a reckoning.” “Only six months into the Fed tightening cycle, we’ve got developing countries defending their own currencies against the surging U.S. dollar, trying to support them by selling Treasuries and dumping the dollar,” Mills writes.
The author adds that a strong dollar is bad for U.S. exporters. “When American companies sell their products to other countries, the latter’s purchasing power is weakened by the strong dollar. The result is lower demand for U.S. exports,” Mills explains. The owner of aheadoftheherd.com adds:
Conversely, the dollar as the world’s reserve currency can only go so low because it will always be in high demand for countries to purchase commodities priced in U.S. dollars, and U.S. Treasuries. It should not be allowed to fall too much, because that would risk the dollar losing its ‘exorbitant privilege.’
‘We Are Rushing Headlong Into a US Dollar Crisis of Epic Proportions’
Mills is not the only person who believes the dollar is doomed to fail or face a reckoning as a great number of market strategists, analysts, and economists have stressed the greenback is down to the last straw. For instance, Robert Kiyosaki, the author of the best-selling book Rich Dad Poor Dad, detailed this month that the U.S. dollar will crash by January 2023. Economist and gold bug Peter Schiff recently explained that the U.S. central bank faces two choices, either “a massive financial crisis” is in the cards or “the world will run away from the dollar.”
The investor and financial author Mills thinks that an economic crisis and the greenback losing its status in the global currency arena will happen. “I personally believe we are rushing headlong into a U.S. dollar crisis of epic proportions. In fact, within the next five years, the buck could lose its status as the world’s reserve currency,” Mills’ blog post on Wednesday notes. Mills further argues that Jerome Powell and the Federal Reserve will not be able to get inflation down to the 2% range without significantly raising the Federal Funds Rate (FFR).
“Arguably the Jay Powell Fed will not be able to bring inflation down to its 2% target without increasing the FFR significantly — probably into the double digits. How high can rates go, and how strong can the dollar get, before the rest of the world ‘cries uncle’?” Mills asks his readers. He adds:
Will Powell make the same mistake as Volcker, running the economy into the ground with rate hikes? It seems likely, given the importance the Fed has placed not only on taming inflation, but maintaining the dollar system. Mark Twain is reputed to have said, ‘History does not repeat itself but it rhymes.’
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What do you think about the investor Richard Mills and his opinion about the U.S. dollar? Let us know your thoughts about this subject in the comments section below.
Jamie Redman
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