It may seem unreasonable to place your investment in the dollar at a time when the Federal Reserve (FED) is injecting money into the system at record levels, while further increasing its debt through bailout programs.
We will not go into historical or arms merit to define the value of the Dollar, since this type of analysis does not change in a matter of weeks.
If there was a fear of default, confiscation or the like, people would flee the currency regardless of 245 years of history or military budget that is greater than the sum of the other seven largest countries.
How does it compare to the Euro or Yuan?
The first conclusion we can draw is that the stability of the Dollar is relative, as it depends on how the other regions and / or powers are behaving.
It is a game of confidence, given that the US debt / gross domestic product (GDP) ratio is one of the highest, losing even to Portugal and Spain.
Note in the chart above that the Dollar is nowhere near the currency in greatest circulation, adding deposits to bank accounts and physical notes. However, when we look at the debt and equity markets, the leadership becomes almost absolute.
Why the hell did you trust the guys?
Despite falling from 74% in 2010 to 61% today, the dollar still forms most of the governments' international reserves. Countries like China have made a huge effort to dispose of dollarized assets in recent years, but the reality is that they are hostages.
As with the chicken and egg dilemma, the chain reaction caused by an eventual breach of confidence would result in the collapse of the other currencies and consequent crash throughout the structure that underpins the big global economies.
In short: you may not even trust the dollar, but the chances of your country breaking before are huge. A cool site to follow is USDebtClock.org, which measures this debt in real time.
Gold and Bitcoin as alternatives
A return to the gold standard has already been widely debated by economists, but the short and medium-term effects of abolishing this addiction to economic stimuli do not represent the will of the population.
The living proof is that even more liberal governments like the United States are indiscriminately approving safeguards programs, and yet their approval remains high.
There is nothing to indicate that the Dollar will lose its dominance in the short term. Whoever bet against, broke. Luckily for us, this does not prevent Bitcoin from winning the fight, right now, with the other currencies and even silver and gold.
About the author
Marcel Pechman served as a trader for 18 years at UBS, Deutsche and Safra. Since May 2017, he has been doing arbitrage and trading in cryptocurrencies, as well as co-founder of the cryptocurrency analysis website RadarBTC.