“The only action needed to control inflation is the rise of interest rates.” There is no tight correlation between the ranges of inflation that the US Government is willing to admit to, and the Dollar on the DXY. Then, in the mid to late 1970s when inflation went back up, the dollar went down slightly, but it didn’t collapse or lose its reserve currency status, as some people may think. Image: US Consumer Price Inflation 1972-199 In the early 1970s, the CPI was at 12% (red line in the image below), and it did go down to about 7%, but only as much as it did in 2020, where it went from 100 to 90. “If the CPI goes double digits, the dollar will collapse.”Īnother popular belief George mentions is, if CPI goes to double digits, then the dollar will collapse and lose its reserve currency status. However, the dollar went up during this time when compared to the DXY, which is the dollar against a basket of other global FIAT currencies, as shown in the image below: Image: DXY 1975-1990 Interest rates went to 14% during the early 1970s, as you can see in the image below. And the dollar gets stronger with rising interest rates. George says most of us have some common preconceived notions around interest rates and inflation in the US. “If interest rates go up, the dollar gets stronger.” Some Preconceived Notions On Interest Rates And Inflation And How The 1970s Data Can Prove Us Wrong To better understand this, we need to realize what our preconceived notions are and how wrong they are. This may help central planners tame inflation and apply yield curve control, but it will make the US wealth gap bigger, and as a consequence, forge a poorer country. The commercial banking system in the US will no longer be in charge of credit creation because the Fed is trying to manage credit creation by manipulating interest rates.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |