If creating money causes it to lose value, why is the US Dollar Index at more than a 15 year high?

[KelleyNice]

The Fed’s broadest measure of the money supply, called M2, is more than $21.6 trillion today, up from $15.5 trillion in February 2020. That is a 40 percent increase. However, during the same time, the US Dollar Index has increased 9 percent from 98 to 107. That is the highest it has been since 2003.

[DWornock]

The money created by the Federal Reserve is certainly causing the dollar to lose value. However, the index is a measure of the value of the United States dollar relative to a basket of foreign currencies. They are:
Euro (EUR), 57.6% weight
Japanese yen (JPY) 13.6% weight
Pound sterling (GBP), 11.9% weight
Canadian dollar (CAD), 9.1% weight
Swedish krona (SEK), 4.2% weight
Swiss franc (CHF) 3.6% weight

Since the other currencies, especially the Euro, is losing value more rapidly than the US Dollar, the U. S. Dollar Index is increasing. If the value of the other currencies were not losing value, the U. S. Dollar Index would be decreasing.

[joeldalton]

US Dollar index is compared to other country's currency, not it's buying power domestically.

[Sixgunsound]

Inflation is not what happens when prices go up, it is what happens when huge arbitrary baseless cash injections into the money supply without any increase in production or addition of value to the economy make each unity of money decrease in value, requiring more units of money to exchange for the same good or service. Stimulus checks are actually the worst thing you can do to an artificially ailing economy. Getting out of the way and stop destroying people’s ability to be productive would add much more value that stealthily robbing not only the recipient of the check whose taxes at least somewhat contributed to it but also their children and grandchildren through debasing the currency. In the 1929 depression, government made it last longer than all previous US financial crashes. Literally doing nothing nothing at all would have been better as the market would be able to course correct quicker and get back to normal. This is yet another situation demonstrating the consequences of a bloated bureaucracy in need of justification to exist.

[abc3643]

"Inflation is not what happens when prices go up, it is what happens when huge arbitrary baseless cash injections "

You have a lot of learning to do.
I will cut you slack because you are too young and cannot possibly remember real inflation back in the 1970s... and a major part of that was ____supply_shocks___, part of what is happening today with supply chain issues. Back then, the Arab Oil Embargo and subsequent Energy Crisis was a significant factor contributing to the problem.

That said, yes, part of today's inflation is due to the cash handed out during COVID to help the economy stay afloat, but it's not baseless.

I'll quote Ronald Reagan:
When your neighbor loses his job, it's a recession.
When you lose your job, it's a depression.

Cash injections into the economy are often critical to stabilizing it or bring it into recovery.
That's what happened during FDR's term to help recover from the Great Depression.
Similar when Reagan became President: Paul Voelker slaughtered inflation by raising interest rates very high; that created a recession, but killed inflation. Reagan then gave tax cuts, but, more importantly deficit-spent for military and that gave a kick-start to the economy in the 1980s.

[abc3643]

Regulating the money supply is an economic control mechanism. The field is known as monetary policy and part of that is also the control of interest rates by the Federal Reserve.

It's important to learn the difference between M1 and M2, which are two different measures of the money supply.
https://courses.lumenlearning.com/suny-macroeconomics/chapter/measuring-money-currency-m1-and-m2

When you learn macroeconomics (something that is not required unless you are an economics or business major), they will formally teach you about M1, M2, monetary policy, and fiscal policy (such as taxes and tariffs).

[KelleyNice]

Thank you for the link describing M1 and M2. It was informative and interesting.

[HighValue]

Inflation increased much more, in effect decreasing the actual purchasing power of the US dollar. Go to the store to get food, get gas, or pay utility bills. You can have a little more income now and be able to buy MUCH less than you could just a couple years ago.

[Adaeva]

Other than what I read it this post, I know nothing about the US Dollar Index. Whether it is up or down has little relevance to me. What does matter is higher prices.

[OddBeMe]

Quantitative easing is pretty complex. Don’t expect, or trust, any deep answers here. But inflation is tied to a lot of things. Covid, the Covid stimulus, gas prices, home value bubble…


But the Fed is run by some qualified economists. Their corporate goons, who give Wall Street corps interest free loans. But they keep the dollar value stable. EU or International Monetary Fund also does the same with the Euro, maybe better since it’s worth more.

[ArtemisSilver]

So the fox in charge of watching the hen house assures us all is well. Splendid.

[007kingifrit]

because as the rest of the world becomes unstable people retreat to the greatest country to buy things and store money in safe places

[eagle1951]

i guess cause all the other counties are in trouble too

[BillyBalls]

That index is affected by arbitrage in currency markets.

[RuthlessAggression]

Because the euro is going down in value

[Zeus_66]

Simply put, comes down to one word: inflation