E Pluribus Unum. It’s on every $1 bill, printed on the ribbon that flows within the grasp of the eagle’s beak. It’s been present on US currency since 1795. E Pluribus Unum is a Latin term meaning “Out of many, One”. The phrase is all encompassing. Among others, it speaks to the 50 states that form our union. It speaks to the diversity of our culture that forms the melting pot. It speaks to our Dollar. There is no rival to the Greenback.
The United States has long maintained a “Strong Dollar Policy” believing that a Strong Dollar is in the nation’s best interest. But it hasn’t always been utilized. Coming out of the recession and in response to September 11th, the Dollar weakened quite a bit against other currencies as an economic tool which made US exports more attractive overseas. US Manufacturers benefitted, as their products were deemed cheaper than many international products. There was a big tradeoff. It also made foreign travel for Americans much more expensive. Low interest rates have had a natural effect: weakening the US Dollar.
However, the US Dollar has long been viewed as the global currency. Despite the rumblings as it lost strength in recent years, travelers know you can find Dollars in circulation around the globe. An alternative to the Dollar as the global currency was widely sought after. Gold was considered a likely solution. There was a time when Vladimir Putin suggested global oil to switch from pricing in Dollars to Rubles. That wasn’t going to happen. With the formation of the European Union, it was believed that the Euro would rival the Greenback for global currency supremacy. It hasn’t happened. 6 years ago, the Euro conversion was $1.60. The British pound was over $2. Both have headed quite lower at $1.29 and $1.63 respectively. Do you remember the early days of the Euro when it traded at 85 cents against the Dollar? Currency volatility has been unprecedented. The free market likes the US currency. Mexico still prefers Dollars to Pesos on the Streets and in shops. An important question is, have those currencies weakened or has the Dollar strengthened? The answer is both.
We’ve chronicled many times how demand for US assets are very strong right now. That means stocks, bonds, Dollars and real estate. Americans and International investors seek the safety and stability of the US Dollar. Europe is facing tremendous economic challenges, and their Central Banks are fast at work. Geopolitics are creating tremendous instability around the globe. After an extended period of a weak US Dollar, it looks like the Greenback is taking off again. Over the coming years, interest rates are expected to rise, the US economy should continue to show stable growth, stock prices will likely continue to perform well, and the US Dollar will reign supreme on the global landscape. We see it coming, and are prepared for it.
E Pluribus Unum.
Have a nice weekend. We’ll be back dark and early on Monday.
BY: Mike Frazier