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Opinion

Dollar devalues dramatically on turbulent trading

Dollar

The US dollar has experienced one of its most dramatic devaluation events in modern times, crashing from a local high to approximately half of its value in just six weeks.

The dollar has always been an intriguing monetary experiment – a bid to create and maintain value without backing it with any commodity or physical goods. Critics have accused the Treasury of ‘financial alchemy’ or even running a scam akin to a Ponzi scheme, but the longevity of the currency has always limited the credibility of naysayers.

With more dollars printed every year, devaluation via inflation has always been a feature of the world’s most popular currency. However, over the course of the dollar’s history, this has almost always occurred gradually, at a rate of just 2-3% per year.

The beginning of the end?

Since the beginning of April, however, the US dollar has plummeted in value. On 1 April a dollar was worth 0.000243 BTC. By the beginning of this week, that had fallen to 0.00012 BTC – less than a half of its value only six weeks earlier.

The precise reasons for this fall are unclear, but it is possible that American consumers are finally starting to question the wisdom of an endlessly-inflationary, unbacked currency – as well as a government that is prepared to fund and even extend its debt obligations with new money. A nascent trade war with China, and wider uncertainty about the future role of America as a leading global economic and military force, have likely undermined confidence further. As confidence grows in a single currency, it is only natural that others should suffer. It appears that traders may be taking profits from the recent strength of the dollar and putting it into harder currencies and more promising long-term assets – potentially in anticipation of the dollar’s terminal decline.

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