FDI 2020 0919

The US dollar underwent a deflationary surge in value early this year as a spark of government lockdowns lit a mountain of debt timber.  It reversed sharply to the downside on March 23 with the Federal Reserve’s launch of QE Infinity, igniting a full-on crash. Over the past few weeks, the pace of dollar depreciation has slowed as the Fed’s soaring balance sheet growth leveled off.  In the spirit of a picture is worth a thousand words, the below chart of the Financology Dollar Index tells the story.

 

Financology Dollar Index 2020 0919

3 thoughts on “FDI 2020 0919

  1. cb says:

    Don’t you mean deflationary pause?

    And by deflation, do you mean falling prices or declining amount of dollars in circulation?

    1. Bill Terrell says:

      There are multiple accepted meanings for the terms inflation and deflation. Generally on this site I use the term inflation for a decrease in the currency value and deflation for an increase.

      A decrease in the value of currency means it takes more of it to buy the same stuff, so this translates into an increase in prices. And vice versa.

      Inflation is also used to refer to an increase in the quantity of money, which all else being equal results in a decrease in its value. If I’m using that meaning it’s either clear from the context or I explicitly call it out. All else is seldom equal though, as this overlooks the effect of money demand.

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