The Dollar Bubble: Hard to See without Bubble-Vision Glasses
Remember how hard it was to see the Internet stock bubble before it popped in early 2000? Remember when buying real estate was considered a great quick-flip investment before the housing bubble began to burst in 2007? Unpopped bubbles really can be very deceiving. Of course, after they pop, that’s another story. Hindsight is 20/20. But before they pop, you need special bubble-vision glasses in order to see an unburst bubble.
Here are your bubble-vision glasses for the dollar. Once you look at the dollar this way, you’ll see for yourself that this bubble has no choice but to pop.
To use your bubble-vision glasses, you must look at the dollar through the two lenses of supply and demand—the same two forces that determine the value of any asset.
In the simplest terms, growing supply (due in part to recent massive money printing by the Fed) is driving the dollar bubble up. And in the future, falling demand (due to factors we will explain shortly) will drive the dollar bubble down. Unless there is significant demand, no asset—bubble or no bubble—can retain its value.
While these concepts are logical and straightforward, accepting that the mighty U.S. dollar is actually an asset bubble getting ready to pop is pretty hard to swallow. It means that we have to accept that the future value of the U.S. dollar has nothing to do with what a great country we are, or how we have been the greatest economic power the world has ever seen. ...