230122 - DXY study in currency debasement.

Thesis:
Increased Central Banks' balance sheets leads to currency debasement.
Following from previous study into the increase in the Central Banks' Balance sheet.

Chart:
DOLLAR INDEX WITH MAJOR CURRENCIES OVERLAID.
To track %-changes of each currency relative to the US-Dollar 1/ from 1976 (removal of last tethers of gold standard) and 2/ from 2016. 'Strange' divergencies in currency valuations around that time. (Different timescales lead to different %-changes - provides further insights)

All currencies above DXY: cheaper than USD. Everything below, more expensive.

Conclusions:

• The federalreserve may be printing US$ are the rate of knots, but EUR, JPY CHF and GBP do the same, to varying degrees.
  
• The currency debasement is relative. As currencies are measured against another currency, if the Principal is not depreciating as much as the counter party, the debasement is not as serious. I don't know if I can draw the conclusion that this is only true in international trade. Domestically, the counterparty depreciation doesn't matter, if the principal depreciates, there's inflation domestically.
  
• GBP has expanded balance sheet the most, followed by EUR.
  
• CHF appreciated most
  
• JPY has expanded the least, hence the depreciation of JPY since 2021. Sudden reversal since 2023 - trouble in JPY bond market, as depreciation of currency leads to smaller bond returns.
  
• THE FEDERAL RESERVE HAS A REPUTATION ON SOCIAL MEDIA FOR PRINTING MONEY, BUT IT APPEARS THEIR POLICY IS VERY MUCH MIDDLE OF ROAD.
  

How to trade this
I am guessing that Bank of Japan will want the JPY to return to normal levels, to fix bond market.