The US dollar is on track for its worst year in modern history

Original Article ↗ Hacker News Discussion ↗

Pandemic Inflation, Stimulus, and Blame

  • Ongoing argument over 2021–24 inflation:
    • One side: primarily a COVID supply shock; US handled it better than others, and large stimulus “kept people whole” with acceptable tradeoff (strong growth, higher inflation).
    • Other side: “helicopter money” and asset support (PPP, stock market) inevitably fed into later price inflation; a smaller CARES Act would have meant less inflation.
  • Some expect the next few years to be worse due to earlier monetary expansion and new tariffs, differing on whether this is mainly the prior or current administration’s fault.

Is the Dollar Drop “By Design”?

  • Several commenters see dollar weakening as deliberate policy aligned with tariffs: making imports more expensive and exports cheaper, encouraging reshoring and manufacturing jobs.
  • Others warn this scares off foreign capital, raises borrowing costs, and may be linked to policy signals (talk of taking control of the Fed, shifting debt issuance to short-term T‑bills, large deficits).

Effects of a Weaker Dollar

  • Positives highlighted: boosts exporters, supports manufacturing, encourages investment in the US rather than abroad.
  • Negatives emphasized:
    • De facto cut in US living standards, especially via higher prices for imported food, energy, and goods; tariffs + devaluation = “double whammy” on inflation.
    • Limits Fed’s ability to cut rates if inflation picks up.
  • Foreign investors note that, in their currencies, recent US stock gains are flat or negative; currency swings similarly distort perceived outperformance of Europe and Japan.

Trade Imbalances and Global Rebalancing

  • Long subthread on global imbalances:
    • View 1: Surplus countries’ policies (subsidies, capital controls, export bias) keep currencies too weak; US deficits and over-financialization are the flip side. Rebalancing is necessary, though painful.
    • View 2: The imbalance mostly benefited the US; current tariffs and currency moves are a self-inflicted wound serving oligarchic and political interests more than workers.

How Bad Is This Move, Historically?

  • Some point to the Dollar Index over 30 years and argue current moves are within a normal range; only a further 10%+ drop would be historically extreme.
  • Others stress the combination of rapid devaluation, tariffs, political instability, and threats to central bank independence as the real risk, not the spot level alone.

Broader Anxiety and Alternatives

  • Several express conviction that the US faces dramatic inflation and an overvalued stock market but see few safe havens beyond global equity funds, commodities, or gold.
  • A minority calls fiat inherently doomed and promotes privacy coins; others counter that fiat regimes greatly reduced boom–bust volatility versus the gold standard.