Dollar will increase?

Question

Dollar will increase?

Answer 1

SDD must mean # dollars will increase.  When # dollars increase, value decreases.  Value of the dollar is going to keep decreasing.

Interest rate differentials is one driver.  Europe is determined to raise interest rates to stave off inflation.  Their rates will go up at the expense of ours, making European bonds better yielding vs. dollar bonds relative to where they are now.  People buy Euros to buy Euro bonds.

Also, and this is the scariest part, it looks like the US is in the process of guaranteeing Fannie Mae and Freddie Mac, the two agencies that buy most of the US residential mortgages.  These two agencies guarantee the repayment of the interest and principal on these mortgages.  We have all seen how many of these are defaulting, which means they will not be paid back.  Fannie Mae and Freddie Mac have to pay the people who bought the mortgages the value.  The US government has always said they would not pay for these, that it was up to these to agencies to pay, but people have always assumed that the government would make good on them.

When people buy "US Treasuries" they are buying the bonds issued by the government and which the government has promised to repay (and which they can--they can just tax us enough to repay them.)  But "US Agencies" are these "Fannie" and "Freddie" securities and the size of the US Agency market is much larger than the Treasury market.  When people talk about how much US Government debt foreign countries own, they almost always mean both Treasury and Agency debt.  Because so much Agency debt is owned by foreign governments, it seems impossible the government would allow default on the Agency debt.

This may be confusing, but what it means is that the government is about to take an enormous number of defaulted and defaulting loans on to its own books to make both foreign governments and US bondholders whole.  If I held a foreign currency, there is NO WAY I would buy dollars--the currency of a government that is just about to take on trillions of dollars in new liabilities.

Personally, I am buying silver.  Gold works, too.

Answer 2

We will make more, but for every dollar they make they become worth less. Treasury notes are needed to cover the money that's printed,so every time we make money it's worth LESS.

Answer 3

Yep. The Fed is printing more of them every day. Faster and faster.