Brilliant breakdown of the currency paradox here. The point about how cheapr exports today mean costlier debt servicing tomorrow is something most coverage misses entirely. I've seen this play out with emerging market currencies before, but it's wild to watch it unfold in real time with the dollar given the scale.
But then Trump appointed Kevin Warsh as next Fed Chair, and things got better ;-). What a lot of global craziness around the unpredictability of one man! And I don't mean Kevin...
There are serious weaknesses with every point you make about “effects,” starting with the inflation effect. We don’t import a large share of GDP, as a typical small or developing economy does. The Fed does not have much reason to defend the dollar, unless it starts falling at 10% per quarter rather than per year. Since we owe a lot to the rest of the world, in dollars, a falling dollar makes the debt burden lighter. None of your points are irrelevant, but the explanations are one-sided due to oversimplification.
Brilliant breakdown of the currency paradox here. The point about how cheapr exports today mean costlier debt servicing tomorrow is something most coverage misses entirely. I've seen this play out with emerging market currencies before, but it's wild to watch it unfold in real time with the dollar given the scale.
Thank you! We are really passing the buck. Short term gains for a lifelong/ generational pain.
The worse part about it it is the slowest and longest problem ever. We have been kicking this can my whole life. Literally
But then Trump appointed Kevin Warsh as next Fed Chair, and things got better ;-). What a lot of global craziness around the unpredictability of one man! And I don't mean Kevin...
There are serious weaknesses with every point you make about “effects,” starting with the inflation effect. We don’t import a large share of GDP, as a typical small or developing economy does. The Fed does not have much reason to defend the dollar, unless it starts falling at 10% per quarter rather than per year. Since we owe a lot to the rest of the world, in dollars, a falling dollar makes the debt burden lighter. None of your points are irrelevant, but the explanations are one-sided due to oversimplification.
Thank for your note. I would love to read your post on this topic.
https://johnevansklock.substack.com/p/the-yuan-that-didnt-bark
That’s at least a start.
https://johnevansklock.substack.com/p/the-yuan-that-didnt-bark
Thank you. I will take a look at your post about the weakness of the dollar. I hope it’s as complete as you expect of others.