WEST PALM BEACH, FLORIDA – Something I’ve been thinking about a lot…

It’s about quantitative easing (QE) and how it affects the U.S. dollar.

QE is the technical name the Federal Reserve uses to describe its money-printing campaigns.

The Fed first used QE after the banking collapse in 2008, for six years. It printed around $3 trillion over three rounds of QE.

Now it’s using QE again. This campaign began in September 2019.

So far in this QE campaign, the Fed has printed about $2 trillion. (But as regular Postcards readers know, there’s still a lot more to come.)

So how does QE relate to the dollar?

All else being equal, increasing the amount of base money – which is what the Fed does with QE – should debase the dollar’s purchasing power by an equal amount.

Yet since the Fed began QE in 2008, the dollar’s purchasing power has gotten STRONGER.

(It is, of course, an outrageous generalisation to distill the movements of millions of prices into one word – “stronger.” But having spent two years traveling around the United States and the world, I can say, generally, the U.S. dollar’s purchasing power has been pretty firm these last few years.)

Why didn’t QE in the last decade erode the dollar’s purchasing power? And why should we expect this new round of QE to be any different this decade?

(My answer below.)

The Most Important Experience of Our Whole Trip

Greetings from West Palm Beach, Florida…

The kids are doing their schoolwork, Kate’s parents are reading the newspapers, and I’m in the garage, at my makeshift desk, writing this message by hand. I reverse the car to make room for my little table and chair…

After traveling around the world, the most common question we get is, “What was your favorite place?” 

The experience that stands out most for me wasn’t something we wanted… or even planned for. 

My mother has Parkinson’s Disease. Last year, she decided to try a new, experimental therapy to treat her Parkinson’s called the Duodopa Pump.

It’s a machine that pumps medication straight into your body. You carry it around like a handbag.

Every few minutes, it pushes medicine into your digestive tract through a plastic tube that goes into your stomach through a little hole.

The great thing about it is you don’t have to take pills anymore. You get the medication you need all day long, without thinking about it.

Last year, my mother went into hospital for the surgery to put the hole in her stomach and install the tube. Kate, the kids, and I were in India at the time.

Unfortunately, they screwed up the surgery. They pierced something they shouldn’t have pierced and then sewed her back up. She got a terrible infection that almost killed her.

We had to rush to London from Delhi to be by her side… and then help her get back on her feet. We ended up staying in London for three months.

Anyway, the point I was going to make is, these were challenging, worrying times for us. But in the end, helping Mum recover and getting to spend three months living in her house ended up being the most important experience of our whole trip…

Much more profound than any foreign country or tourist site… and something none of us will ever forget.

(The Duodopa Pump has been a big success for her, too. She’s much more active these days than she was before she started using the pump.)

My mother. The black thing hanging around her neck is the Duodopa Pump

The Three Effects of QE in the Last Decade

Turning back to QE and the dollar…

Investment professionals divide Wall Street firms into two categories… the “buy side” and the “sell side.” 

The “buy side” refers to the fund managers and asset accumulators who represent the world’s investors. I’m talking about the mutual funds, the ETF providers, the pension funds, the wealth funds, the hedge funds, and individual investors. 

The “sell side” refers to banks and financiers who issue, sell, or trade securities to the market. The investment banks are the main sell-side players. 

Between 2008 and 2017, the Fed printed $3 trillion and then bought government and mortgage bonds. In other words, it acted as a “buy side” asset manager, just as a pension fund or a wealth manager would do.

This had the effect of a) reducing interest rates, b) supporting prices and liquidity, and most important of all, c) fostering investors’ animal spirits, which ultimately led to rising asset prices and a “successful” bailout of Wall Street. 

Critically, the Fed’s money-printing never leaked into the real economy. It stayed in the financial system and caused asset price inflation. But it didn’t debase the currency.

(Last month, as animal spirits evaporated, previous rounds of QE turned into a DEFLATIONARY force when the asset inflation unwound and smashed the stock and bond prices.) 

QE money-printing in the last decade did not threaten the dollar’s store of value or erode its purchasing power. What about this decade’s new round of QE?

Project Argentina

Today, the Fed is printing money again. Again, it’s acting as a “buy side” asset manager and again, it’s trying to tease investors’ animal spirits. We’ll see if it’s successful in that.

The Fed is also doing something new this time. I’ve been pointing this out over and over in these Postcards.

I’ve referred to it as the Fed “bailing out” the government. I’ve also called it the “slow motion credit crunch,” the “soft default,” and the “global synchronized currency devaluation,” among other things. 

The Treasury is broke. Its bills exceed its revenues by several trillion dollars. It has a $23 trillion pile of debt. There are NO MORE whales willing to finance the Treasury’s reckless borrowing and spending. And liquidity disappeared last month.

(Whales, by the way, are foreign trading partners, like China, that are willing to run billion-dollar trade surpluses with the United States… and then recycle their savings back to the Treasury as cheap loans. The Europeans, the Saudis, and East Asians have all played this role at one point or another over the last 70 years, but won’t do it anymore.) 

There are no more lenders. So the Fed is now being forced to assume the role of “lender of last resort” to the Treasury… financing the U.S. twin deficits and monetizing the Treasury’s debt.


I believe this is a completely different way for the Fed to use its printed money from how it printed money with QE in the last decade.

That was “buy side” asset purchases. This is Project Argentina.

It’s very debasing… and it WILL soon begin eroding the purchasing power of the dollar. 

When people start to understand this and sense this, I imagine it will lead to an epic rise in the price of gold and silver. We’ll see. 

– Tom Dyson

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In today’s mailbag, readers share how the Postcards inspire them… ask Tom about his accent… and inquire about gold ETFs

Reader comment: I recently (by accident) read your Postcards. I was trying to read Bill Bonner’s Diary and mistakenly clicked on a postcard. And for the past three nights I have been reading all the older Postcards sitting in my inbox. Anyway, I love your postcards. Your opinions and assessments are well written and easy to understand, which is very satisfying to those of us without PhDs in finance or economy. Keep up the good work.

I am also forwarding your emails to my son in college (studying accounting at the University of Florida) and we then discuss your points on the phone. I don’t understand, nor can I picture, the end game. I have been stocking up on gold, silver, and ammunition for years, and am praying I will never have to use any of it. 

Reader question: Been watching your videos, and you seem to have an accent. Did you grow up in Great Britain or South Africa? If you have already covered this background info, apologies. I am new to your videos.

By the way, please disregard that idiot that wants you to “tweak your videos.” I am so sick of presenters who always want to put on a “smiley face” on any given subject, no matter how grave or somber the situation may be. Do what you feel comfortable doing in front of the camera. Your message is coming through loud and clear – that’s what matters.

Tom’s response: It’s a long story. I’m a British citizen but I have lived almost my entire life in the United States. Except when I went to school in England, which is where I picked up the accent.

Reader question: I’ve been following your work for a long time now, and I generally agree with your views on gold. One thing I have never been sure of is this: If someone believed that a devaluation of the dollar is eventually coming and they wanted to buy one of the gold ETFs, is it better to buy the gold ETFs priced in dollars, or would it make more sense to buy the gold ETFs priced in the currency of the person’s home country? I ask because I live in the UK and most of my assets and liabilities are in GBP. 

Tom’s response: It doesn’t make any difference. Gold is gold, wherever you live in the world… regardless of the currency you use to buy it or the currency you collect when you sell it. I don’t recommend gold ETFs, though. Especially GLD. I much prefer gold closed-end funds that store actual gold and allow you to redeem your shares for gold bullion if you so wish…

And, as always, thank you for your messages! Please keep writing us at [email protected].