The Dollar Wrecking Ball:
I hear the narratives that the Fed is printing money...Brrr... and that is going to cause a dollar collapse. I worry that this narrative is very wrong. My strongly held view is that the dollar is the pinnacle of all the macro issues we face.
The Fed have undertaken unprecedented printing, as we know, and the balance sheet is growing exponentially.
But it is not that simple. We live in a relative world where the dollar standard is the very cause of many of the issues we now face. There are simply not enough dollars available in the world to service all the debts and thus a debt deflation remains the BIG RISK.
The expansion of the balance sheet is in fact correlated to the rise of the dollar, not the fall. Here is the Fed Broad Trade Weighted Dollar Index versus the Fed balance sheet.
And since last year, when the global slowdown started, the two are joined at the hip...
People have been looking at the messy chart of the DXY and have been quick to call the end of t…
The Fed have undertaken unprecedented printing, as we know, and the balance sheet is growing exponentially.
But it is not that simple. We live in a relative world where the dollar standard is the very cause of many of the issues we now face. There are simply not enough dollars available in the world to service all the debts and thus a debt deflation remains the BIG RISK.
The expansion of the balance sheet is in fact correlated to the rise of the dollar, not the fall. Here is the Fed Broad Trade Weighted Dollar Index versus the Fed balance sheet.
And since last year, when the global slowdown started, the two are joined at the hip...
People have been looking at the messy chart of the DXY and have been quick to call the end of t…
