US Dollar Rally Running Out of Steam

The US Federal budget deficit has been running at 4-5% of US GDP fairly consistently since the 1980's. There was a brief period during the Clinton administration when the deficit flipped to surplus, but it was short-lived. Today, with the US economy growing steadily and the stock market near all-time highs, the US budget deficit is on track to reach -4% of GDP in 2018. When the next recession hits, likely in 2019, the US budget deficit will deteriorate sharply.

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I expect the USD will decline in line with the worsening fiscal position of the US as demand for the greenback will not be sufficient to meet the increased supply of newly printed dollars required to finance the running of the country. A long-term view of the world reserve currency highlights the broad declining trend of the USD since the 1980's. Money should flow to the hard currencies that cannot be printed out of thin air in the years ahead. Got gold?

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