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August 12, 2019 | Can the US Government Really Force the Dollar Lower?

Martin Armstrong

Martin Arthur Armstrong is the former chairman of Princeton Economics International Ltd. He is best known for his economic predictions based on the Economic Confidence Model, which he developed.

QUESTION: Hi Martin, What tools do the US have to TRY and manipulate their dollar lower (other than cutting interest rates) and in your opinion would they be successful? How much do they have in the Exchange Stabilization Fund? Do they have a defense plan to limit and control capital flows coming in?


ANSWER: They lack any power to prevent a dollar rally. The Exchange Stabilization Fund (ESF) is a U.S. Department of Treasury emergency reserve fund that includes holdings of U.S. dollars (USD), other foreign currencies, and special drawing rights (SDR) funds. The financial statement of the ESF can be accessed at “Reports” or “Finances and Operations.” However, all previous attempts at manipulating currencies have ended in disaster. Yes, the U.S. could put capital controls to block capital coming in, but they would destroy the world economy if they even attempted such a hair-brain idea.

Lowering interest rates will not help for if capital fears survival elsewhere, the level of interest rates will mean nothing. Just look at the creation of the G5 at the Plaza Accord. The market had already turned so their manipulation was already in the direction of the decline. When the dollar fell too far and the other members complained, they then held the Louvre Accord. The markets saw them as incompetent and the dollar continued its cyclical decline on schedule.

Therefore, I have yet to find any period in history where there has been a coordinated effort that has ever succeeded.

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August 12th, 2019

Posted In: Armstrong Economics

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