7 Key Indicators Pointing to US Dollar’s Eventual Decline
As outlined in the graphic below, there are seven key indicators to watch as the US government falls deeper into the self-perpetuating debt spiral that I think will culminate in the weakening of the US dollar.
Indicator #1: Federal Budget Deficits
The chart below shows the actual and projected federal budget deficits.
It’s important to note that the projections have the ridiculous assumption that there will be no wars, recessions, or other events that cause extra federal spending.
Even with this rosy and unrealistic forecast, the US government is projected to have a cumulative deficit of over $22 trillion over the next ten years, which will have to be financed by issuing more debt.
Indicator #2: The Federal Debt
The federal debt has exceeded $35 trillion, representing more than 123% of GDP.
It’s important to remember that GDP is a flawed statistic.
For example, it counts government spending as a positive. A more honest measure would count government spending as a big negative as it compounds the debt spiral.
In the US, government spending accounts for at least 37% of GDP.
This means that the debt relative to the productive economy supporting it is much higher than most people realize.
Indicator #3: The Federal Interest Expense
Annualized interest on the federal debt exceeded $1 trillion for the first time this year and is shooting higher.
The interest cost on the federal debt is already the US government’s second-largest expenditure—larger than even the defense budget.
Interest expense is set to exceed Social Security and become the BIGGEST federal expenditure in the coming months.
Indicator #4: The Federal Funds Rate
In the wake of the 2008 financial crisis, the Fed brought interest rates to roughly 0% and held them there for years.
Then, in late 2015, they started a rate-hiking cycle that lasted until the repo market turmoil in late 2019.
After the outbreak of the Covid mass psychosis in early 2020, the Fed brought interest rates back down to around 0%.
Inflation subsequently hit 40-year highs in 2022, forcing the Fed into another rate-hiking cycle, one of the steepest in history.
In just 18 months, the Fed hiked rates from around 0% to over 5%.
The Fed has now pivoted back to monetary easing and rate cuts without having defeated inflation.
That’s because the skyrocketing interest expense threatens the solvency of the US government and forces the Fed to cut interest rates and keep them artificially low to try to control interest costs.
Indicator #5: Money Supply
The skyrocketing interest expense forces the Fed to implement interest cost control policies, which inflate the money supply. These include buying Treasuries with money the Fed creates out of thin air and similar measures.
No matter what the Fed calls it, the only way they can try to control interest costs is to inflate the money supply.
Remember, the Fed has only two tools in its toolbox: currency debasement and gaslighting.
Since 2020, the US money supply has skyrocketed by 37%, an incredible change in such a short period.
If your after-tax wealth has not increased by 37% since 2020, then you are not keeping up with the Fed’s monetary debasement. You are losing ground and on the road to serfdom.
Indicator #6: Consumer Price Index
The Consumer Price Index (CPI) is the most politically manipulated statistic in all of government.
That is saying something because many government statistics are completely manipulated, but inflation, as measured by the CPI, is probably the most manipulated.
The CPI is a basket of prices trying to measure the average price changes for 340 million Americans.
It’s an impossible task because every individual has a different price basket. Consider someone who lives in New York City compared to someone who lives in rural Montana. They have totally different price baskets.
Using the CPI as a measure of price increases for 340 million people is even more preposterous than taking the average temperature across 50 states in the US as a meaningful statistic to determine what clothes you should wear today.
Further, the government gets to cherry-pick what items go in the CPI basket and their weightings. It’s like letting a student grade his own paper.
In short, the CPI is misleading government propaganda intended to conceal the government’s atrocious currency debasement.
All that being said, it is useful to monitor the CPI, not as a meaningful metric to gauge inflation, but as a metric to analyze the Fed’s actions and gaslighting.
Indicator #7: The Gold Price
Gold is mankind’s most enduring form of money—for over 5,000 years—because of unique characteristics that made it best suited to store and exchange value.
Gold is durable, divisible, consistent, convenient, scarce, and most importantly, the “hardest” of all physical commodities.
In other words, gold is the one physical commodity that is the “hardest to produce” (relative to existing stockpiles) and, therefore, the most resistant to debasement.
Gold is indestructible, and its stockpiles have built up over thousands of years. That’s a big reason why the growth of new gold supply—typically 1-2% per year—is insignificant.
In other words, nobody can arbitrarily inflate the supply.
That makes gold an excellent store of value and gives the yellow metal its superior monetary properties.
People in every country of the world value gold. Its worth doesn’t depend on any government or any counterparty at all. Gold has always been an inherently international and politically neutral asset.
This is why different civilizations around the world have used gold as money for millennia.
From a historical point of view, using fiat currency as money is a relatively new concept. As it fades, I expect people will rediscover the world’s premier money: gold.
This trend is already well underway.
I expect the price of gold—which is already hitting record highs—to soar as this all plays out.
If the gold price is already hitting record highs, imagine what could happen now that the Fed has flipped back to monetary easing with potentially even more currency debasement than the previous rounds of stimulus.
I think the gold price could skyrocket.
While this megatrend is already well underway, I believe the most significant gains are still ahead.
Select gold mining stocks are the best way to get speculative upside.
Think of investing in a gold mining stock like a leveraged play on gold. Even a tiny change in the price of gold can have an enormous impact on the profits of a miner.
The key is to get positioned in select gold mining stocks—companies with world-class resources—before the bull market takes off in earnest.
