Conroe and Washington, D.C., August 30 – A new phenomenon has begun to impact the United States Dollar in comparison to global currencies. The Dollar is no longer a haven for nervous investors when international events create uncertainty. The situation has been especially pronounced during the past three days after global markets sought investments, other than the dollar, in response to North Korea’s launch of a missile over Japan.
The dollar has declined steadily since 2016 with the WSJ Dollar Index down 8% since January 1, 2017, which includes a 2% decline during the month of August, 2017. As The Wall Street Journal has reported, during 2017, the American Dollar has declined 11% against the Euro and 4% against the Mexican peso.
Rather than investing in the dollar, markets sought out gold, government bonds, the Euro, and even Mexican pesos, for stability. An even stranger phenomenon is that the American dollar has declined while the United States Federal Reserve has slowed begun to raise interest rates.
Two major trends seem to contribute to the counterintuitive actions of global markets. First, in comparison to the United States, Europe’s financial markets have become more stable. Europe’s economic growth has exceeded that of the United States. Furthermore, global markets are finding the European Central Bank more understandable and predictable than the Federal Reserve.
One of the major causes of the global retreat from the Dollar has been the growing sense that American governments – at all levels – are out of control. Take the Montgomery County government as an example. The County government lacks any fiscal direction or management. Rather than budgeting based upon goals and purposes and limiting expenditures to necessity, the County government has gone through the last two decades spending every dollar that it could find available to it.
While the County’s debt rating has grown to AAA, the rating merely reflects two factors, as the County’s financial advisors explained in the Commissioners Court: (1) the County has enjoyed a consistent population growth, and (2) the County’s citizens have looked the other way as the County government has consistently increased government spending.
Meanwhile, Montgomery County’s debt has increased substantially, particularly as the government uses short-term debt obligations to fund capital improvements while sponging up every cent of property appraisal growth into increased government spending.
The proposed Fiscal Year 2018 Budget is a lower total dollar amount than the previous year only because the County defeased some bond debt and reduced debt service by nearly $22 million. In actuality, however, the actual governmental expenditure budget (spending other than debt service) actually is rising to historically high levels for Fiscal Year 2018.
While Montgomery County’s government spending growth is far more out-of-control and rising more rapidly than the vast majority of other county governments in Texas, Texas’ state government, or the federal government, the reality is that spending at all levels of government is rapidly moving Montgomery County, Texas, and the entire United States into a fiscal crisis.
Government can’t find enough money to spend, while the citizens are witnessing their disposable income (earning minus taxes) rapidly decline.