Week of 4/13/2023

Today’s Letter is devoted to the dollar. We are often asked about the implications of debt, inflation, gold, the rise of cryptocurrency, and how all of these relate to the US Dollar and more broadly to our economy and markets. We’re going to look at a few perspectives that reflect our opinion (just so our bias is clear) that the dollar will remain the dominant currency for the foreseeable future.

Brad McMillan explains why there is no viable alternative to the dollar. A key point: “Frankly, a lot of the talk is nonsense designed to panic you into buying something the doomsters are trying to sell, often gold.” JP Morgan’s David Kelly agrees that the dollar’s place is unlikely to change, even if the dollar declines slowly against other currencies over time. The debt ceiling standoff is a confidence risk that we will face soon. First Trust’s Brian Wesbury discusses the unique factors that have made the dollar so attractive for so long, qualities not absent in the countries who would like currency dominance. While he is concerned about bad policy’s effect on the dollar, he makes a good point: “But, before you become convinced that this will happen to the US anytime soon, think about what might replace the dollar. It would have to be a currency managed by a country that had better policies." And one item, unrelated to the strength of the dollar but dealing with a good way to use them: For Alachua County residents, you may enjoy learning more about The Amazing Give. It has been a very successful fundraising initiative for area nonprofits. A large number of organizations are participating, and you will certainly find something worthy of your support.

Q: We’ve heard so much about a coming recession. What’s the outlook? A: Each month, Commonwealth’s Sam Millette updates a review of various risk factors. Not much has changed since March, with an overall expectation for quarterly economic growth, but concerns in consumer confidence and the yield curve. Both have been helpful leading indicators in the past.

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