President Trump wants to increase exports and says the dollar has to come down. Janet Yellen and the Fed are hell-bent on raising interest rates, which should increase the value of the dollar. Historically the economy slows down when rates begin to climb yet the stock market is soaring.
High inflation affects all of us and generally signals a weakening of the currency. Kiplinger forecasts, “Core inflation, which excludes food and energy, will end 2017 at a 2.4% annual rate.”
For those who don’t eat or drive, that doesn’t sound too bad. They also predict, “Overall prices of groceries will be nearly flat next year but the cost of dining out will rise.”.
Gasbuddy reports, “Motorists to spend $52 billion more at the pump in 2017, yearly average to be 36-cents higher.” They anticipate the average price will rise 16.9% to $2.49/gallon.
When you fill your tank on the way to your favorite restaurant, you’ll likely agree with Shadowstats. If inflation were calculated in the same manner it was in 1990 the published rate would be around 6%.
I contacted good friend Rob Vrijhof, President and Senior Partner of Weber Hartmann Vrijhof & Partners Ltd. They are headquartered in Zurich. Rob’s team manages our offshore investments.
Rob has a worldwide perspective on investing. When they place a trade for their clients, they search for good investments, and then decide the best currency to use holding the investment. Most US investors never think about this; your broker normally has all your investments in US dollars.
He agreed to give us some of his time for an interview.
DENNIS: Rob, on behalf of our readers, thank you for your time today.
I want to start by asking about the dollar and inflation. To me inflation is the value of one currency in relationship to others. When the US government bailed out the banks and created trillions out of thin air, many felt the value of the dollar would go down. It appears the rest of the world was devaluing their respective currencies at an even faster rate because the dollar increased. From a global perspective, what do you see happening with the dollar in 2017?
ROB: Thank you for inviting me.
Indeed, a very interesting question. It does seem that national banks worldwide are doing everything possible to devalue their respective currency, be that in Euroland, China, Japan or even Switzerland. Because of this we are, and have been, seeing a flight to safety into the world’s reserve currency: the US Dollar.
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