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The Dollar Takes a Beating March 27, 2017

Posted by geoff in News.
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The value of the dollar soared after Trump’s election, but has lost much of that gain since. Why? Well, first take a look at the federal rate for the past 10 years:

FederalFundsTargetRate2017

So the first thing you notice is that the Fed was essentially unable to raise the rate for the entirety of Obama’s inglorious reign (they changed it once: from 0.25% to 0.5% at the end of 2015). They talked about raising on numerous occasions, but were never able to pull the trigger, for fear of killing off our already-anemic recovery.

Until Trump, when they were able to raise it twice

What does this have to do with the value of the dollar? Well, Zero Hedge put up this chart today, which I think tells the story pretty effectively:

20170325_dollar_0

You see the post-election boom, and then a jump at the first rate hike due to excitement over the benefits of higher interest rates to the banking/finance industries. But then reality for the rest of the world sets in, and the dollar starts sliding.

Stock markets are taking a big hit as well, since the market’s confidence in Trump’s ability to stimulate economic growth have eroded after the Obamacare modification debacle.

I think the Fed may have been a bit aggressive, and it would sure be nice if Congress would restore the wind under the president’s wings.

Because I’m kind of fond of prosperity.

 

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