Daily Gains Letter Warns: Fundamentals of U.S. Dollar Point to Long-Term Deterioration

Daily Gains Letter financial analyst Moe Zulfiqar issues warning on U.S. dollar fundamentals.

Daily Gains Letter (www.DailyGainsLetter.com,), an e-letter published by Lombardi Publishing Corporation, a 27-year-old consumer publisher that has served over one million customers in 141 countries, warns that despite short-term gains, the underlying fundamentals of the U.S. dollar are getting weaker, pointing to long-term deterioration.

“According to the mainstream, it’s a great time for investors to fortify their portfolios with the U.S. dollar, because it’s going to gain strength,” says financial analyst Moe Zulfiqar. “The reasoning? Central banks around the world are working to devalue their currencies to stimulate their local economies. Because it has proven to be a safe investment in the past, investors rush in to purchase the U.S. dollar.”

In the short run, Zulfiqar adds, this might be a viable investment strategy. In fact, since late October, the U.S dollar has gained strength compared to other major currencies. However, buying the U.S. dollar may not be the best long-term approach; from a long-term perspective, the fundamentals of the U.S. dollar look quite bleak.

“First, the Federal Reserve continues its $85.0-billion-per month quantitative easing policy unabated. While the Federal Reserve has said it will eventually begin to taper its easy money policy, most fail to realize this means it will still be printing, just at a slower pace,” Zulfiqar observes. “What this long-term quantitative easing policy does, regardless of whether the Fed tapers or not, is devalue the U.S. dollar and create monetary inflation.”

On top of that, the U.S. budget deficit remains high. While the U.S budget deficit slowed in fiscal 2013 to $680 billion from more than $1.0 trillion in 2012; the damage has been done. After the financial crisis struck the U.S. economy, the government attempted to heal the country by recklessly spending. The result: the U.S. national debt has surpassed $17.0 trillion. The greater the budget deficit the U.S. government incurs, the higher the national debt is going to be. This phenomenon eventually increases the chance of the government defaulting on its debt, Zulfiqar explains, resulting in creditors selling their bonds and flooding the markets with U.S. dollars. (Source: “Final Monthly Treasury Statement of Receipts and Outlays of the United States Government,” U.S. Department of the Treasury web site, October 30, 2013.)

“Finally, there’s simply no sustainable economic growth in play in the U.S. economy,” he says. “Wall Street may be doing fine, but the average American isn’t: wages are stagnant, unemployment remains stubbornly high, a record number (15%) of Americans receive food stamps, and the poverty rate in this country sits at 16.6%. The average American cannot meet the most basic needs with their income.” (Source: Gabe, T., Poverty in the United States: 2012, November 13, 2013; http://www.fas.org/sgp/crs/misc/RL33069.pdf.)

“The U.S. dollar may excel in the short term because of the general consensus that it’s a good trade, but when it comes to the fundamentals, the U.S. dollar appears weak,” Zulfiqar concludes. “As we see even more quantitative easing, budget deficits, and higher national debt, the U.S. dollar is going to deteriorate even further.”

Founded in 1986, Lombardi Publishing Corporation, which has served over one million customers in 141 countries, is one of the largest consumer information publishers in the world. For more information on Lombardi Publishing Corporation and Daily Gains Letter, visit www.lombardipublishing.com.

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Release ID: 27260