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12-29-35 The Hidden Logic Behind Dollar Weakness The U.S. doesn’t want a permanently strong dollar because it would choke the global economy and destabilize trade. In this short video, Santiago Capital and I discuss why the U.S. has historically managed the dollar to stay range-bound and how dollar strength...

18,702 görüntüleme • 6 ay önce •via X (Twitter)

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Most people read the dollar exactly backwards. A rising dollar looks like strength. Strong America, good economy, the Fed doing its job. A falling dollar looks like weakness. Inflation, debasement, the end of dollar dominance. It is the other way around. A rising dollar usually means global funding is tightening. The world is short of dollars and scrambling to find them. That is not strength. That is stress. Think of a hurricane coming and everyone rushing to buy bottled water. The price spikes. That does not mean the water got stronger. It means people are scared and desperate. The dollar works the same way. When it surges against everything at once, it is telling you dollars are getting scarce, not that America is winning. That is why the dollar spikes in crises. The 1997 Asian crisis. 2008. The 2015 emerging market squeeze. March 2020. The 2024 carry trade blow up. The pattern is not random. None of this is really about the Fed or money printing. The dollar's exchange value is mechanical. It runs on the eurodollar system, the offshore dollar funding made of bank balance sheets, collateral, repo, and swaps. The biggest driver is dealer balance sheets. When dealers expand, dollars flow and the world feels calm. When they pull back, dollars get scarce and the dollar climbs. And this is the part everyone gets wrong. When foreign central banks sell US treasuries, the headlines scream that they are dumping America. They are not. They are using their reserves exactly as designed. When their markets are short of dollars, they sell treasuries to supply them. Sell treasuries, the dollar goes up. That is stress, not rejection. Which is why the dollar doom story keeps failing. They said QE would destroy the dollar after 2008. They said the deficits would collapse it. It never happened, because the problem was never too many dollars. It was not enough usable ones in the right places. So when someone tells you a strong dollar means America is strong, be careful. The strongest looking dollar is often the biggest warning sign. And a falling dollar is usually just the storm passing.

Jeffrey P. Snider

103,465 görüntüleme • 29 gün önce