The U.S. dollar and the euro have hit parity.  You can now exchange one U.S. dollar and get approximately one euro.  You have to go back almost 20 years to see this.

There was one point in 2008 where exchanging a euro would get you over $1.50.  That just shows the massive drop that has occurred.

So why is the dollar so strong, especially considering that price inflation was recently above 9%?  Should we be bullish on the dollar?

It is first important to recognize that we are comparing fiat currencies to each other.  They are all controlled by a central bank, which are controlled by government.

It isn’t so much that the dollar is good.  It’s just that the other major fiat currencies are so much worse.  That goes in particular for the yen and the euro.

The Chinese yuan is rather meaningless in comparison to the dollar because it still isn’t freely floating.  The euro and the yen are openly traded.

The European Central Bank and the Bank of Japan are creating money out of thin air like crazy, just as the Federal Reserve has done for the last 14 years.  But at least the Fed has stopped it (for now) to fight the price inflation that it caused.

The U.S. also has the luxury (if you want to call it that) of being the world’s reserve currency.  This is slowly fading, but it still holds true.  That is a reason that it surprises me a little that the dollar has been strong even against the horrible euro.  With the sanctions, and what is essentially a default against Russia, it’s curious why more foreign countries aren’t dumping dollars like there’s no tomorrow.

Russia dumped most of its U.S. treasury holdings a while ago.  They were wise to do so.  Japan and China are still the major foreign holders of U.S. government debt.  I think the Chinese government is incredibly naïve for doing this.  The fact that the Chinese central bank is still holding almost one trillion dollars of U.S. debt tells me that there must be something to the theories that Biden is working hand-in-hand with the Chinese government.

Then again, it must be every president.  It’s not as if China was dumping its holdings when Trump was president.  It makes you wonder if all of the bluster is real, or if Chinese officials are really that naïve.

Chinese officials have to see what just happened with Russia.  The U.S. government, of all entities, didn’t like Russia going into another country.  So they placed heavy sanctions and basically stiffed the Russians out of money they were owed.

If something more goes down with Taiwan, why couldn’t the U.S. government just stiff the Chinese of their one trillion dollars in holdings?  To ask the question is to answer it.

But apparently what has happened with Russia hasn’t been enough to sink the U.S. dollar.  It is still king of the major fiat currencies, at least for now.

Ironically, the U.S. government’s intervention in Ukraine has hurt Europe far more than anyone.  The Europeans are obeying their U.S. masters and shooting themselves in their collective feet.  As energy prices soar and people get ready for a potentially brutal winter, the Russians seem to be doing far better than the Europeans.

The European version of socialism isn’t working out too well.  The people there tolerate far more than Americans, although we can acknowledge that a few places such as Hungary are doing comparatively well.

There are more protests in places like Germany and France than we see in the United States.  But they have a lot more to protest.  For the horrible lockdowns and vaccine mandates that have happened in the United States, it has been even worse in other “first world” countries.

It is rather sad to see the decline of Europe.  I think that’s yet another reason why it’s important that the U.S. get through this time of increasing totalitarianism and find liberty again.  We need to set an example for the rest of the world.

Economically, it is going to be really tough times ahead for much of the world.  I think Western Europe will have it particularly rough.  The euro is just one of many canaries in the coalmine.  Americans won’t have it easy, but it will likely be better than most of Europe.