The dollar has been on a tear in recent months. Just last week, the dollar index moved from 107 to 108 with an inter-week high of 109.3. The greenback also hit parity with the euro last week. The dollar is near a 20-year high compared to the European currency and a 24-year high against the Japanese yen.
And yet we have a massive devaluing of the dollar domestically. In his podcast, Peter tries to make sense of this tale of two dollars.
You can see the impact of dollar strength on import-export prices.
Export prices rose 0.7 on the month and are up 18.2% on the year – double the consumer price index. Peter noted that import prices are a better reflection of prices paid by consumers for domestically produced goods than the 9.1% CPI.
That is a real number, unlike the CPI that is a completely contrived, made-up number where you have a formula that’s reverse-engineered to come out with a lower number.”
On the flip side, import prices are much lower thanks to the power of the dollar. Nevertheless, even with dollar strength, import prices are still up 10.7% year-on-year.
It’s because the dollar is so strong that import prices are only up by 10.7% on the year. Because if the dollar wasn’t so strong, import prices would have gone up a lot more than that and that would have spilled over into the CPI. So, but for the strong dollar, we would have much higher inflation numbers than the ones we’re dealing with.”
The situation is the opposite overseas. Europeans and Japanese are paying much more for stuff they...