the US dollar's real face

When writing or speaking about the dollar, currency strategists tend to ignore a key parameter intervening in the fixation of the exchange rate: money supply. When the USA sent planes full of dollars to pay Afghan civil servants or when the Fed opens its window to let dollars flow into the market, it does more to the dollar and, by extension, to global inflation, than interest rates.
The stance of US officials, when they speak about the strategic interest for the US of a strong dollar, leaves me skeptical. The USA economy is a debt driven economy and it is of their strategic interest to repay their debt with a weak currency. No wonder that, to quote Richard Fisher, a Fed's member: "We Americans do love debt ! "...
To make the world swallow the pill easily, the USA have to do some window dressing for the money supply and debt figures. The USA has made it difficult to know the real money supply total (M3 is not published any more). The latest M3 chart available shows that the supply shot up in 2002 when growth was slowing down... The discussion between Ron Paul and Alan Greenspan about M3 in the senate speaks by itself. On the debt side, Daniel Gros of the Center for European Policy Studies, showed that there was a hole of $1.8 trillion in the debt reporting at the end of 2004.
Sure the USA will not default on its debt because they can continue to monetize it (print dollars to repay it) as long as it stays a leading reserve currency. But for how long?
Addendum 3/04/09.
Today, because of the crisis and in order not to add additional pressure on the world financial system, the USA have managed to keep the currency in a stable range. They are doing so through monitoring the price of gold... How is that? The $ has a negative correlation with the price of gold as evidenced by the following chart:

Knowing this, the USA are leasing their gold reserves to companies playing on the gold market in a way which pleases the US authorities: to push the dollar up/down, they push the gold price down/up (as previously written, major moves of the dollar are preceded by moves of the gold price).

Things have therefore steadied lately on the dollar and gold front. That will change in a few years time when the USA will feel more independent in terms of energy (construction of new nuclear power plants etc.) . Today, because of the inverse correlation between the dollar and commodities prices, when the dollar goes down, the USA feel the pinch in terms of inflation. Once less dependent for oil, the USA will devalue the dollar to repay its pile of debts... When you will see the long term trend of gold going up again, get ready for a nice slide downhill for the dollar.

(Addendum 5 August 2011:
When the stockmarket goes down, so does gold. If, as expected, the market moves into bearish territory for the rest of the year, the dollar will consequently go in the opposite direction. The recent drop in the dollar is a buying opportunity: piling up some cash of it with the objective of stepping back into the US stockmarket later in the year ...).

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