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The Dollar is Dead

Posted on March 19, 2009 by Adam

From this point on, the US dollar is finished.

Well folks, we did it. After more than 200 years, we killed the dollar.

The United States Dollar, born in 1792, lived a good life. It is survived by its siblings the Pound, the Euro, and the Frank (the Yen was already dead).

When the Fed announced its plans to expand its balance sheet yesterday, it established itself as the most aggressive Federal Reserve administration in the history of the United States, and that is saying a lot.

Its plans to buy US Treasuries and mortgage backed securities launched enormous rallies across the board, notably in equities, Treasuries, and gold. But instead of rallying, the US dollar was down by a huge 3%, and it looks like it is heading even lower today.

By pumping dollars into the economy, the Fed and the Treasury have flooded the world with a supply of the currencies. That’s good for the economy, no doubt. It should help us to unwind the debt problems we have. That’s something we desperately need.

However, most people are ignoring the longer term effects of this infusion of money into our money supply. I think yesterday was just the start of a long, painful hyperinflation spiral in the dollar. With interest rates at zero, and a Fed willing to do anything to jumpstart the economy, I think the dollar is finished.

Ouch.