Economics is all about perspective. A 1% tax sounds awful next to no tax but looks amazing compared to a 3% tax. To really get it, you need the story behind the numbers—what’s causing them and why they’re acting up. Without that, numbers are just random squiggles that make your head spin.
Take the dollar's recent hot streak, for example. Against other currencies, it’s flexing like Hulk Hogan in his prime. But what’s the deal with this muscle show?
Here are Five Fast Facts on the post-election dollar surge:
- 💪 What Gives? - Since the election, the dollar’s strength (compared to other currencies) has shot up as much as 5%...and since early October it’s up around 8%! It’s the strongest we’ve seen in two years!
- 😮 Yay Inflation…Wait, What? - Some predict that Trump’s threats of tariffs will cause inflation to go even higher. The Fed would then move interest rates higher, which would cause overseas investors to put more money into the dollar supply, further strengthening the dollar. Hard to say that’s a good thing from a “regular person” perspective, though. Just sayin’...
- 😎 Play Rich (Over There) - When the dollar flexes, it makes you feel richer because every dollar buys more…in other countries. Exchange rates make dollars multiply like rabbits and that makes traveling Americans very happy. So, it might be a good time to take that international trip you’ve been thinking about.
- 📉 Going Down - Of course, it’s also possible that a stronger dollar actually lowers inflation (wouldn’t want things to be confusing, right?). This is because foreign buyers would have to pay more, slowing down demand for American goods from other countries, thus pushing our prices down, too.
- 🤔 Unintended Consequences? - Investing, especially with retirement accounts, flips the script. Big companies often make a lot of their money from sales in other countries. If American goods are pricier overseas, those companies face the same problem: fewer sales and lower profits. And since profits fuel stock prices...yeah, not great news.
🔥Bottom line: The key to things going well with the surging dollar is if that surge is long term rather than short term, and if there is legit economic growth to sustain the lower profits from overseas sales. If we see that, then the dollar’s flex will be as rock hard as those pythons.
Have you noticed the dollar surge?
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