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Strong U.S. dollar an unstoppable force endangering other currencies

39 Comments
By Thomas URBAIN

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39 Comments
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With Russian's invasion of Ukraine and supply shocks due to food shortages and China's erratic behavior, of course the dollar will rise. It is the currency of choice in times of crises. When things calm down, it will drop to a more appropriate level.

9 ( +18 / -9 )

The misleading bubble of the dollar does not stop deceiving..

Although it does not have much time left, perhaps the BRICS will give the dollar the coup de grâce and stop being the currency that dominates the economic world..

Many things move behind the curtain, the new world order is getting closer..

-17 ( +7 / -24 )

@Laguna

 of course the dollar will rise. It is the currency of choice in times of crises. When things calm down, it will drop to a more appropriate level.

I hope you are right. But one thing the last few years have taught us is that the future is very hard to predict.

17 ( +17 / -0 )

The dazzling rise of the U.S. dollar, which has hit one record after another, is raising fears of a currency crash of a severity not seen since the 1997 Asian financial crisis reverberated around the world.

The never-ending irony of the global financialization of capital.

Domestically in the US, I equality grows ad many are opting out of the free market of labor altogether.

And abroad exporters benefit from weak local currencies but the benefits do not trickle down.

Where is the long-standing promise, unfulfilled, of the win-win of deregulation and globalization?

-1 ( +4 / -5 )

For countries like Taiwan, Thailand or South Korea, which also dependent on energy imports, China's zero-Covid policy has caused their exports to this key trading partner to plummet.

Nice to see the authors here acknowledging that Taiwan is a country!

22 ( +26 / -4 )

Globalization has proven to be a failure.

Which means that all countries need to have economically diversified sectors as much as they are able to.

There are limits on diversification but unless we look to more locally produced goods and services then the result is the present chaos which we are all witnessing.

1 ( +12 / -11 )

And this is why you don't let one currency dominate the whole market. More currency swap should happen between nations. What these nations need to do is pay in different currency when they trade. For example if we import products from China or south korea, we should pay in their currency and they should pay in ours if they buy our products. This help stabilize each other currency and makes things a lot more fair than paying everything in dollar.

11 ( +15 / -4 )

A huge spike in American tourists is just what the world needs right now. Take that sarcastically or seriously.

4 ( +7 / -3 )

Strong now, but for how long?

0 ( +5 / -5 )

Many things move behind the curtain, the new world order is getting closer..

you say, while hypocritically living in the free west

2 ( +6 / -4 )

For example if we import products from China or south korea, we should pay in their currency... 

We do, in the end. The S. Korean exporters need to pay workers' salaries, taxes and other costs at home in won. If their trade income is in dollars, then they must sell those dollars, weakening the price of the greenback, and buy won, strengthening its price.

Perhaps the BRICS will give the dollar the coup de grâce

Hahaha!

-2 ( +2 / -4 )

Surely no need to worry after last weeks super effective intervention . . .

8 ( +8 / -0 )

Which leaves us back at 145 yen to the US dollar

4 ( +6 / -2 )

Nice to see the authors here acknowledging Taiwan as a country !

The authors are mistaken.

Calling Taiwan a country and acknowledging Taiwan as a country is two different things and renders your point moot.

Because it's impossible to acknowledge something that doesn't exist.

When the USA and Japan and the United nations officially announce Taiwanese independence as a republic then it would be possible to acknowledge Taiwan as a country - however Taiwan has yet to actually claim independence !

Furthermore Taiwan still claims to be the rightful government of all China and thus is still technically engaged in a civil war as part of china.

Some people fail to comprehend this fact .

By now you should have realized that the strongest and most influential world powers acknowledge the one china two systems and that Taiwan is most definitely NOT its own country YET !

I would like to see Taiwan become an independent nation again ,however that hasn't happened yet since Japan colonized them for 50 years and thwarted the recognized and acknowledged status of Formosa Taiwan.

-16 ( +3 / -19 )

 of course the dollar will rise. It is the currency of choice in times of crises. When things calm down, it will drop to a more appropriate level.

The same used to be said about the Japanese yen - safe haven in the times of crises. Look at it now.

6 ( +7 / -1 )

Sell your YEN until you still can.

Next step is Yen for 200.

-11 ( +5 / -16 )

" of course the dollar will rise. It is the currency of choice in times of crises."

It used to be the Japanese yen that was considered a safe harbor - but after imposing an unexplainable travel ban against all incoming foreign travel, including students and businesses, the yen lost this haven status

-5 ( +5 / -10 )

Wanna hear a interesting fact?

During the tsunami of 2011, the yen gotten so strong against the dollar that the government was force to sell the yen against the dollar to stabilize the currency. Back then people complain that a strong yen is bad because how much we export.

And now the problem is that a weak yen is bad for import. This show you just how weird and mess up the market can get when a crisis hit.

1 ( +4 / -3 )

perhaps the BRICS will give the dollar the coup de grâce and stop being the currency that dominates the economic world..

Perhaps and perhaps maybe one day China will be able to beat USA Basketball..

Neither are likely to happen.

4 ( +5 / -1 )

Interesting that you are comparing 3rd World countries with Japan :)

To be honest, while looking how fast the Yen is losing its value, that might not be too far from the truth in less than 10 years...

-7 ( +6 / -13 )

The Federal Reserve's rapid, steep interest rate increases and the relative health of the U.S. economy

The first of these causes is undeniable but its the US economy in "relative health"?

It sounds like it is about to enter recession, not least because of the policy of "rapid, steep interest rate increases". These are being imposed to squeeze life out of the economy in an attempt to control inflation. Since the current inflation is caused by cost push from fuel etc. and supply shortages post Covid, cars going for over RRP due to huge backlogs etc., these interest rates may be misguided, esp. in a country where so many have personal debt for mortgages, student loans, car loans, etc.

4 ( +4 / -0 )

This could have been avoided had Biden and the Fed not ignored the clear warning signs of inflation. Now they are in panic mode raising rates and will send the US into a deep recession. The rich will benefit because as usual they are mostly recession proof but the middle class will suffer. There will be a correction looming.

Selfishly I am enjoying this for now and saving up. Getting paid in dollars while living in Japan is like getting a massive (albeit temporary) raise.

0 ( +4 / -4 )

The FRB has a lot of power. Authoritarianism allows it to make adjustments without going through Congress. Imagine if they had to pass a bill every time they wanted to do something. Governors being appointed by Congress may seem democratic but we all know cronysim: Get your Guy in Thereism.

The FRB much like the CCP, runs with efficiency and without the hassle of lawmakers.

2 ( +3 / -1 )

Well country after country are moving away from the dollar (eg: BRICS) as such will not need dollar as the reserve currency, this artificial increase will only hasten this process.

0 ( +3 / -3 )

@Jexan

this could have been avoided had Biden and the Fed not ignored the clear warning signs of inflation.

Huh? The situation is a Trump legacy. Remember when Yellen was fed chief? She was appointed by Obama and then began to gradually "taper" Fed policy, slowly and gradually raising rates early on while the economy remained strong and healthy.

But then Trump came to power. He started crying, saying it was unfair that Obama had low rates while he didn't. So he fired Yellen and replaced her with the ham-fisted Powell, who promptly lowered rates and loosened policy despite a strong economy.

if Trump allowed Yellen to stick around to continue the successful tapering program, the inflation situation wouldnt be nearly so bad today.

-4 ( +4 / -8 )

Well country after country are moving away from the dollar (eg: BRICS) as such will not need dollar as the reserve currency, this artificial increase will only hasten this process.

Most commodity (e.g. oil) transactions are denominated in dollars. So they cannot move away from the dollar.

-3 ( +1 / -4 )

Bretton Woods, Nixon abandoning the gold standard and the creation of private central banks — three nails in the coffin.

3 ( +5 / -2 )

There is no food shortage period. There a stortage in Europe which effect Europe exports. There is a oversupply of grain in the southern hemisphere. Europe exporters are preventing these countries that receive these exports from Europe from dumping existing contracts and taking up contracts with Australia, Africa and North and South America. Oil is control by OPEC and they are taking advantage of the war and demanding higher prices. That is capitalism working at it best or worst depending on your present status.

0 ( +1 / -1 )

I wouldn't be surprised to see the dollar appreciate relative to the yen for another 30 yen or so, to something like 175 yen to a dollar, in the near future. Fundamentals do not indicate that the BOJ or Ministry of Finance can jawbone the yen to rise in value. Intervention without significant changes will be short lived. Conditions need to change significantly for any real moderations in the yen's fall. IMHO

1 ( +3 / -2 )

This will be 10x worse than 2008 according to some economists. Think things are bad now, wait until the panic starts. Big moves are being made behind the scenes. Buckle up.

1 ( +2 / -1 )

A strong USD is not that good for the Americans either. It makes imports cheaper for Americans. 

It gives Americans more of an incentive to buy from abroad, be it goods, finished products or services.

Tariffs can counter it to some extent but tariffs only create market distortions and make local industries less competitive.

0 ( +1 / -1 )

bubble can explode anytime soon,just check USA debt....

-4 ( +1 / -5 )

Most commodity (e.g. oil) transactions are denominated in dollars. So they cannot move away from the dollar..

That was the past, In today's world countries, especially BRICS are moving away from the dollar, and especially for oil transactions..

https://www.reuters.com/business/energy/exclusive-russia-seeking-oil-payments-india-dirhams-sources-document-2022-07-18/

https://www.thehindu.com/business/Economy/explained-what-is-rupee-rouble-mechanism-why-is-india-considering-to-revive-it/article65313729.ece

https://asia.nikkei.com/Business/Energy/China-to-start-paying-for-Russian-gas-in-rubles-yuan-Gazprom

https://economictimes.indiatimes.com/industry/energy/oil-gas/india-set-to-pay-for-iranian-oil-using-rupees-from-november-sources/articleshow/65887179.cms

0 ( +0 / -0 )

This looks like a vicious circle. The Fed raises rates to stop inflation, this pushes up the dollar and the prices of commodities priced in it, cost push from commodities (and the war and exiting Covid) causes consumer prices to rise, and this is perceived as "inflation" and we end up with more incentive to raise interest rates.

Higher prices in themselves will quell demand for goods, this perceived "overheating". That's what Economics 101 says. The big risk here is that interest rate rises will crash the (US) housing market. Which is good if you are a corporate investor looking to buy up real estate with cash at a big discount, but not if you are an ordinary person who had to borrow a fortune, at a now-over low interest rate, simply to house yourself and your family. Negative equity is staring people in the face.

https://fortune.com/2022/10/01/home-price-correction-intensifies-what-to-expect-from-housing-market-2023/

0 ( +0 / -0 )

Quite a big part of that development is surely caused not for substantial economic parameters but by something like wartime psychological effects I would guess. The US dollar is now very strong and the Russian ruble too, both the currencies of the global block leaders so to say. It’s an effect when many investors or other business people gather and stand supporting in line behind their leading nation, intentionally or not, doesn’t play much a role, but the effect develops out of that and has now become obvious and getting momentum.

0 ( +0 / -0 )

A strong dollar is the future. This decade, the entire developed world, and more than half the developing world, reach retirement age. What happens to people once they stop work or get laid off and have to live off their savings: what kinds of investments do they seek? Risky SPACs or risky growth stocks (all now down on average 40% of more)? NO. They go for GUARANTEED, if reduced returns, and strong currencies/strong economies. Hence, the world's funds will continue to flow in the US, and into the dollar. It's not that America/the Dollar are "perfect"; more like they're the "cleanest dirty shirt in a very dirty laundromat"!

As for the countries facing a "dollar-denominated debt crises"? Nobody ordered these countries to borrow in currencies other than their own. Nobody told these countries to adopt Argentinian economic development policies, and borrow borrow away their future in dollars (while squandering their newfound wealth in...yet more re-distributive policies!) These countries have scores of warning stories to have learned from, and they chose to ignore how it all ended in the past, and take the easy money from abroad.

What's ironic about this is that the "inequality" so decried in our Leftist, redistribution-government loving press, is actually going to HELP the dollar retain its dominant position, since it is the rich who continue to expose the vast majority of their assets to riskier investments even after retirement, and their concentration in certain countries will help to ameliorate the drying up of credit caused by the Boomers' epic-sized retirement along with crushing interest rate hikes on the costs of borrowing for anything and everything! As for the more "equal" countries where socialized redistribution has made everyone equal in their economic medeocrity? They should prepare for an end to all those decades of easy loans, financing and investment, along with an end to much of their even-now unsustainable welfare largess!

Congratulations! You are lucky enough to be alive at the time when all our economic models predicated on "always more, forever more, eternally greater growth year after year" finally comes to an end. Are you ready?

-2 ( +3 / -5 )

Larr Flint - Sell your YEN until you still can.

Not easy for those living in Japan, who need their yen to, you know, live.

3 ( +4 / -1 )

Congratulations! You are lucky enough to be alive at the time when all our economic models predicated on "always more, forever more, eternally greater growth year after year" finally comes to an end. Are you ready?

Can't wait!

0 ( +0 / -0 )

Nobody told these countries to adopt Argentinian economic development policies

This is my favorite part, well played lol

1 ( +1 / -0 )

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