The dollar

Any currency reflects the productivity differential (output per man hour) between two countries and government policies on investment and education.

Low productivity relative to another country indicates low profit opportunities. Capital therefore flees to high productivity countries in search for higher profits. It buys the currency of the high productivity country, thus making it stronger.

A weaker currency does not only indicate lower profitability relative to other countries but it may suggest weaker economic conditions in the low productivity country.

The dollar movement is not due to the Fed or other mystical operators. Is due to the simple idea that most of our industries are less productive than those other countries. It may even suggest slower economic conditions ahead.

The markets always win.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked second best gold timer by Timer Digest

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