Why is the US Dollar so strong?

Europe is doing Quantitative easing/Bond buying program similar to what the US did 2 years ago, but on a smaller scale.

analysts say the US $ will strengthen due to this.

but the US's Quantitative easing program has $4.5T (trillion!) on it's books.
basically, the US just printed $4.5T? we're so far in debt that it'll take TWO generations to get out.

but today the US $ is strong.

Does that mean all the other countries in world are in worse shape than the US?
<shudder>

>all the other countries in world are in worse shape than the US?

yes.

I am always amused when Progressives tout how great it would be if only we were more like Europe. Ummm, I think I'll pass on that.

This may be interesting reading for the two of you – and perhaps a few others that might drop in. Jared Dillian. Short commentaries. The more I read this guy, the more I understand him:


Keep your risk managers away from me

(NOTE: In this context, he's referring to "risk managers" as those with PhD's in physics and/or mathematics. Think back to Long Term Capital Management in the mid 90's - Nobel Laureates... again. It's my position that the computer and internet have made many people too smart for their own good but it has also made my job easier. I get that. Better to learn in the trenches than practice with "theory.")


And his previous commentary from 1/15/14:

Hi, I'm Charles Evans, and Welcome to Jackass


Jared Dillian began collaborating in print with John Mauldin last year. I have respected Mauldin's content for 15+ years so I guess I am giving Dillian some trust. I'm not swinging on his nuts, though.

I have always been willing to be wrong, but I've never been willing to stay wrong - that may be why I think this kid might be a fresh breath of air. He has experience, and his Lehman days are behind him.

Maybe it’s prescience or maybe it’s just coincidence, but Dillian addresses the SNB/currency deal plus some US dollar and inflation-related stuff. I’m still digesting it. And I don't do that stuff very well. (Give me a chart and some sentiment data instead and I'll be in my comfort zone...)

I need to state that I am also a "risk manager." But I am ALSO NOT a PhD quantitative analyst. Risk management has at least two facets. I remember August, 1997 vividly, and fondly. It was the perfect storm - collapse of the R. Ruble, Long Term Capital plus the stain on Monica's purple dress.



There may be a nugget or two in these links that add some insight(s) to the topic at hand.


Best,
Mark

Most traders and now I think its most trading programs are herd followers... short term flight to stability or long term consideration, people prefer the dumb Americans and their dollar. A few years ago Argentina was the richest country per capita in South America and its currency was strong. Today its bankrupt and can't get foreign currency at all. People in Buenos Aires open up restaurants within their own homes to entice tourists who have Dollars rather than locals who, like them, have worthless pesos and forty percent inflation and state prosecutors who blow their brains out.

Markets can collapse such as the Japanese stock market or real estate market, but appeal seems to come from durability.

The Saudis buy weapons and armies but put their money in Switzerland. Think of Assad, then the Area Military Commander, when he sold the Golan Heights to Israel. The money went from US Swiss bank accounts, to Iraell Swiss bank accounts to Assad's Swiss bank accounts. He ordered his troops to withdraw a set distance, eight hours later the Israelis advanced. Each side issued pressreleases about a fierce battle, but not on shot was fired.

People should finally see through the weak currency = weak economy myth.

The fact is, the strongest economies on the planet are trying very hard to artificially make their currencies weak. That what the US and China have been competing over for the last few years, and last week Europe has fired a big bullet to get the Euro down.
In turn, two weeks ago, Switzerland conceded that war (knowing what the EU was gonna do). The Swiss Franc gained 15% in one single day. We were too small to compete.

[Two hedge funds immediately went out of business that day: bet on the wrong horse + leverage. Serves them right.]

A weak currency means cheap money, cheap labor and both of that equals higher profit in the stock market, and that is where the 1% have their money.

When the Euro went down, the DAX soared to new record highs with gold rush feelings in Frankfurt. The SMI (Swiss market index) in turn collapsed.

[Brag: My portfolio was ready for that, I came out almost even money.]

Quote: 100xOdds

Does that mean all the other countries in world are in worse shape than the US?
<shudder>

The simple answer is YES, but you have to think about what are the effects of a strong currency. Devastation of the export business primarily. The Swiss bank has been struggling since September 2011 to not let the franc get any stronger than one euro buy 1.2 francs. Finally they gave up the struggle to keep buying euros and let the franc get a little stronger so that euros and franc are at parity.

Quote: Canyonero

People should finally see through the weak currency = weak economy myth.

The fact is, the strongest economies on the planet are trying very hard to artificially make their currencies weak. That what the US and China have been competing over for the last few years, and last week Europe has fired a big bullet to get the Euro down.
In turn, two weeks ago, Switzerland conceded that war (knowing what the EU was gonna do). The Swiss Franc gained 15% in one single day. We were too small to compete.

It is a game called "Devalue Your Way to Prosperity." It is a strange game as the only way to win is not to play.

Your exports get cheap that is true. But investment in your country gets cheap, so your trade partner can more easily just buy the works and keep the excess profit. Then there is the fact that you cannot buy as much as you need on the world markets for commodities.

So in the end you get lots of work but more of your check goes for gas to get you there.

Quote: AZDuffman

It is a game called "Devalue Your Way to Prosperity."

I have also heard it called "beggar thy neighbor".

If only there were a currency that held it's value over 5 thousand years and was recognized by all nations and across all governments?[sarc]

Image from:http://dollarcollapse.com/gold/this-is-what-gold-does-in-a-currency-crisis-euro-edition/ When any currency is measured against something of intrinsic value like Gold [physical] or oil, a different perspective of what the currency is doing becomes more visible.

This is what has happened this month to gold priced in Euros after the announcement of "QE" [otherwise known as money printing] was announced in Europe, this month.