Strength of the Dollar

Strength-of-the-Dollar-0.mp3
Strength-of-the-Dollar-0.mp4
Strength-of-the-Dollar-I.mp3
Strength-of-the-Dollar-I.mp4
Strength-of-the-Dollar-intro.mp3

[Intro]
Is the dollar going down
(Down, down, down)

[Bridge]
Just look around

[Verse 1]
Foreign exchange
Been getting strange
Tryin’ to make sense
Of dollars and cents

[Chorus]
The capital flight
(Is in sight)
Is the dollar going down
(Down, down, down)

[Bridge]
Just look around

[Verse 2]
Things are getting funny
With all our money
The president
Sold us for rent

[Chorus]
The capital flight
(Is in sight)
Is the dollar going down
(Down, down, down)

[Bridge]
Just look around

[Chorus]
The capital flight
(Is in sight)
Is the dollar going down
(Down, down, down)

[Outro]
Is the dollar going down
(Down, down, down)
Just look around

A SCIENCE NOTE

The U.S. dollar (USD) has recently moved more than one standard deviation away from its historical norm in several important ways — particularly in real value, global dominance, and volatility. Here’s how:

1. Real Effective Exchange Rate (REER)

The REER, which adjusts the dollar for inflation and trade weights, has been:

• >1 standard deviation above its 20- or 30-year average multiple times since 2022.

• Driven by aggressive Fed rate hikes, global demand for dollar safety, and geopolitical instability.

 A stronger dollar sounds good, but it hurts exports, destabilizes emerging markets, and increases global debt burdens.

2. Overconcentration in Global Reserves

• The USD still makes up ~60% of global central bank reserves.

• But there’s now a statistically abnormal divergence between:

  • Dollar usage in reserves/trade (still dominant).

  • And alternative systems rising fast (e.g., China’s yuan in BRICS, digital currencies, barter systems).

This mismatch reflects a cracked monetary fractal — a fragile dominance built on inertia, not fundamentals.

3. Purchasing Power Decline

• The real purchasing power of the dollar (adjusted for inflation) has fallen more than 1.5 standard deviations below its 20th-century trendline.

• Traced to:

  • COVID-era fiscal/monetary stimulus,

  • Post-2020 inflation spike,

  • Wage stagnation vs. consumer costs.

4. Dollar Volatility and Financial Stress

• USD volatility, measured via DXY (Dollar Index) and options implied volatility, has spiked to levels well above 1 SD from baseline during:

  • Fed rate shocks,

  • Banking scares (e.g., SVB collapse),

  • Geopolitical tensions (Ukraine, Middle East).

 Summary

The U.S. dollar is now behaving outside its historical statistical bounds:

From the album “Deviation“

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