Mike Gleason: It is my privilege now to welcome in Craig Hemke of the TF Metals Report. Craig runs one of the most highly respected and well-known websites in the entire industry and has been covering the precious metals for a decade now, and he puts out some of the best analysis on banking schemes, the flaws of Keynesian economics, and evidence of manipulation in the gold and silver markets.
Craig, it's been entirely too long. Thanks for joining us again, and how are you my friend?
Craig Hemke: Oh, Mike, it's always a pleasure. Thank you for having me back on. I'm a little more grayer, more wrinkles, all that kind of stuff in the last time since we've spoken, but that's what these markets will do to you, that's for sure.
Mike Gleason: Yeah, certainly do. Craig, we know that you've been covering this rally in the dollar closely over the past 3 weeks. I wanted to kind of start there. The problem is, in the short run, nobody in the markets really cares about the dollar's value relative to what it can actually buy. Traders simply care about how it's performing in foreign exchange, paired against some other national currencies, and the dollar has been strengthening against the euro and the yen. But, with that said, you definitely can't take a dollar and buy more stuff today than you could, say, 3 weeks ago. In fact, it takes more dollars to buy a barrel of crude oil than it did last month. People still figure the CPI basket of goods will cost 2 to 3% more a year from now. Some of us figure inflation has been, and will be, a lot higher than that.
In a minute, we'd like to get your take on whether the rally in the dollar is likely to persist a while longer. But before we get into where the dollar is headed, help us out here, because as we're seeing the dollar getting stronger against paper currencies, and that seems to be all anyone wants to talk about, but meanwhile, the dollar is getting weaker when you look at it compared to the stuff we actually need to buy, like crude oil, for instance, and there are other examples as well. So, explain this to us, if you can, because it appears to us that everyone is focusing on the wrong thing here, Craig.
Craig Hemke: Well, that's always the case it seems like, Mike. Actually, everybody's probably seen those charts going back to 1913, when we instituted the federal reserve and the value of the dollar has declined by 98%, or something like that. Really, the pain for the regular, average, everyday American began in 1971 when Nixon suspended, as they say, the convertibility of the dollar into gold. And that's when the U.S. government, the Treasury, the Fed, went off the rails, began printing currency in their effort to fund both guns and butter, if you will, in the traditional Keynesian sense. All the social programs, all the wars, everything else, all the accumulated debt, and it's at that point that, again, things began to get out of hand.
And it is at that point, you can trace it back, to that's when the standard of living, for every American citizen, really began to decline. It's why my generation, your generation, Mike, everybody has such a much more difficult time making ends meet than, maybe, our parents had. Because not only is it food costs, it's taxes, it's education costs, it's everything that goes with it, and it's because of this incredible devaluation of the currency.
What do you mean by devaluation of the currency? Look, anybody understands, even if you didn't take Econ 101, you know supply and demand, right? And if you increase the supply of a certain item you're, by very definition, devaluing the existing supply of that item. It just makes it less valuable if there's more and more of it, by any, again, by any sense of the imagination. And so, therefore, all of this money printing, all of the trillions of dollars of TARP, and QE, and everything else, has just continued to destroy, really everybody outside of about the top 10% of income earners in the U.S., and sadly, that's a path that we continue to go down.
Mike Gleason: Yeah, certainly the wealth gap gets bigger and bigger, the more inflation we get, that's for sure.
Now, let's talk for a minute about what you're expecting from the dollar, just if we get back to how it's going to relate to other fiat currencies over the short run, and give us a guess on where the DXY index might be by years end. Has the trend lower that began a year and a half ago been broken?
Craig Hemke: Oh, man, I'll tell you what. When you get a move like we've had in the last 4 weeks, it can really shake your core beliefs pretty hard. But, I'm standing by it. I've had the core beliefs, really, ever since election night of Donald Trump. We were sold this bill of goods about, you know, because if you remember, Trump was going to be horrible for the markets, right? And then as soon as he was elected, we had this bill of goods shoved down our throat. We call it the narrative of 2017, you know, oh no, this was going to be great! The dollar was going to soar, and interest rates were going to skyrocket, and all this kind of jazz. And we said, you know, I don't buy it.
And, of course, the dollar index peaked about the first trading day of January 2017, up at about 104, and then fell last year, all the way down to 91, finished up the year at about 93, and then fell again in January, now it's back to about 93. I still think it's going lower this year. I think the breakout in the long-term charts of crude oil, as you mentioned, crude oil now at the highest it's been since December of 2014. You see it in copper, you see really all the commodity markets turning. They are telling you that there's more dollar weakness to come, not dollar strength.
