The Fall of Donald’s Dollar
The quest to find a safe haven for everyone’s assets.
The main currency of the world, the American dollar has been losing its value for some time now. In recent months the decline has gained momentum and the cornerstone of capitalism has lost around 10 percent of its value compared to its main rival, the euro.
As a company operating in the world of financial institutions, we are talking with other portfolio managers, businesspeople and investors from all over the globe on a daily basis. And in recent months the question “What is going on with the dollar?” has been popping up everywhere.
If you read the media, the answers are more or less the same. Donald Trump and the lack of reforms. Donald Trump and North Korea. Or Donald Trump and something else.
But is it really Donald’s fault? A part of the blame can be put on him, but he hasn’t even been in office for a full year. And the USD has been in decline for almost two years.
What is behind the fall of Donald’s dollar?
There is no easy answer, and one has to look even deeper into the details of the global economy. One of the problems of the USD is that its interest rate growth is decelerating. And that is discouraging deposits in USD. For a while everybody was expecting the USD interest rate to rise. But that was in the past. Today, interest rates are already where the markets expect them to be. Yes, the market is still looking for a rise in interest rates, but it is not expected to be a game changer from this point on.
So where can investors store their assets?
Stock markets may seem a good opportunity as the companies (especially the American ones) have been reporting record earnings for some years now. But as we come closer and closer to the next global recession nobody knows where it’s going to explode so investments into the stock market could carry high risks.
Government bonds–once an ultimate safe haven for investors–lost their appeal in the years of the Greek crisis and today most of them have negative interest rates.
Even gold, that has been a store of value for more than two millennia, has seen price volatility recently.
Commodities go hand in hand with the world economy. And when the economy crashes, commodity prices are not far behind.
What about (other, not USD) currencies? Is one of the cornerstones of civilisation an answer to the problems of modern investors?
The answer is yes, but it’s a bit more complex.
First, we have to understand more about currencies.
Liquidity. Currencies have better liquidity on the markets than most alternatives. Probably the best example is the Japanese yen. It is possible to exchange large amounts of this currency for another currency or for large amounts of real goods, for example.
One of the main questions when deciding which currency to invest in is which currency you can buy a lot of durable goods with in a short amount of time. And the yen is one of the best examples due to Japan’s industry-oriented economy. Therefore, you can always buy a lot of, let’s say, cars fast.
For comparison, in absolute terms, the USA is not known to produce as many goods per short time intervals. Generally, the American economy is strong because of the financial sector and tech companies — just look at the list of the most valuable enterprises in the country. Therefore, if you want to spend your dollars fast, you can get a lot of different financial instruments & services, and software. These are things with different types of intrinsic value and are frequently seen as lesser candidates for preservation of value than industrial durable goods, for example.
Safety. Currencies have better protection than stock because they have the backing of the central banks. Due to regulation, currencies can not experience such huge setbacks as stocks and other investment opportunities can. The volatility of currencies is lower than in other asset classes.
Different rules. Currencies are also different from their competition due to their nature. They are the lifeblood of the economy, and different rules apply to them. For example: even in the worst case scenario when ALL of the world currencies start falling, unless they all depreciate at exactly the same rate at the same time, some currencies will always appreciate relative to other ones. This gives investors more options to assert exit scenarios.
But even currencies naturally lose value over time (i.e. inflation) and are co-dependent on various factors like the health of the local economy.
Therefore, the correct answer for the ultimate safe haven for investors is a system that succeeds in preserving value in the longer term, which means the inclusion of inflation-fighting elements.
Every investor needs a safe instrument that is:
- Stable — Stability is achieved by allocating assets between currencies,
- Liquid — It has to invest in the main world currencies on the market that can be easily sold, even in huge sums, and large-scale liquidation should not change the value of the currency on the market.
- Secure — It is architecturally built around an effective financial system with various layers of protection against global risks.
As a solution to all those problems, we have developed the X8 Currency, which is operated by a platform that uses ARM AI technology. Our system is capable of generating low returns on investments with a very high level of safety and with minimal risk. This characteristic helps protect the investor from value loss of managed assets because of the inflation factor.
And therefore it preserves value, not only in the short term but also in the long run.
As a result, it’s the best solution for investors that are looking for short- or long-term answers to enrich their assets without losing sleep.