In the financial world, much is made of the “strong dollar.” Analysts cite rising values on the DXY (US Dollar Index), investors marvel at its performance against other currencies, and central banks adjust their policies accordingly. But is the dollar really strengthening? Or is this narrative simply an illusion created by the relative weakness of other fiat currencies?
To answer this, we must look beyond the DXY and assess the dollar’s performance against real assets like gold, Bitcoin, real estate, and stocks. The findings paint a far less flattering picture for the dollar.
What Does the DXY Actually Measure?
The DXY measures the dollar’s value relative to a basket of major currencies:
- Euro (57.6%)
- Japanese Yen (13.6%)
- British Pound (11.9%)
- Canadian Dollar (9.1%)
- Swedish Krona (4.2%)
- Swiss Franc (3.6%)
When the DXY rises, it means the dollar is strengthening relative to these currencies. For example, recent Federal Reserve rate hikes have attracted capital into U.S. dollar-denominated assets, boosting the dollar’s relative value.
However, the DXY is a relative measure. It tells us how the dollar performs compared to other fiat currencies, not whether it is truly strengthening in an absolute sense.
The Dollar’s Performance Against Real Assets
To understand whether the dollar is actually strengthening, we must compare it to real-world assets that store value over time:
1. The Dollar vs. Gold
Gold has long been a reliable store of value. Here’s how the dollar has fared:
- In 1971, gold was $35 per ounce.
- Today, gold is trading at $2,600 per ounce.
Result: The dollar has lost ~98.65% of its value relative to gold over the past 50 years.
2. The Dollar vs. Bitcoin
Bitcoin, often called “digital gold,” has shown the dollar’s rapid decline in purchasing power:
- In 2010, Bitcoin was less than $1.
- Today, Bitcoin is trading at $100,000.
Result: The dollar has lost ~99.999% of its value relative to Bitcoin since its inception.
3. The Dollar vs. Real Estate
Housing provides another measure of the dollar’s erosion:
- In 1970, the median U.S. home price was ~$23,000.
- In 2023, the median U.S. home price is ~$400,000.
Result: The dollar has lost ~94% of its value relative to housing over the past 50 years.
4. The Dollar vs. Stocks
Stocks, representing productive enterprise, highlight further decline:
- In 1970, the S&P 500 was ~90.
- In 2023, the S&P 500 is ~4,500.
Result: The dollar has lost ~98% of its value relative to equities in the last 50 years.
The Illusion of a “Strong Dollar”
The dollar may appear strong on the DXY, but this is due to the relative weakness of other fiat currencies, such as the euro and yen. These currencies face structural issues like slow growth and loose monetary policy. The dollar’s global reserve currency status also creates artificial demand, masking its long-term decline.
However, when measured against gold, Bitcoin, real estate, and stocks, the dollar’s loss of purchasing power is undeniable. These assets reveal the dollar’s true trajectory: systematic debasement.
Conclusion: Is the Dollar REALLY Strengthening?
When measured against real assets, the dollar is unequivocally not strengthening. While the DXY may rise due to the relative weakness of other fiat currencies, the dollar continues to lose purchasing power in absolute terms.
Here’s the hard truth:
- Gold at $2,600 reflects ~98.65% debasement since 1971.
- Bitcoin at $100,000 highlights ~99.999% loss of value since 2010.
- Real estate and stocks have similarly outpaced the dollar over decades.
Investors relying on the DXY alone are missing the bigger picture. True strength lies in a currency’s ability to preserve value, and by that measure, the dollar is failing. To protect purchasing power, diversification into real assets like gold, Bitcoin, and real estate is more critical than ever.
In the end, the dollar’s “strength” is a convenient illusion. Real value lies elsewhere.
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