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A Strong U.S. Dollar Weighs on the World

nytimes.com

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Re: A Strong U.S. Dollar Weighs on the World

#11

Post by mitthrowaway2 »

avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

Also strange that this effect is to the point that the dollar gets stronger as the yen gets weaker, even though inflation in Japan has been weak and strong in the US. So the dollar's buying power weakened domestically even as it strengthened internationally.

Re: A Strong U.S. Dollar Weighs on the World

#12

Post by littlestymaar »

avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

> You wouldn't think that printing money leads to a stronger currency

Money isn't a commodity, and that's why the Monetarist view is so off.

Inflation is never caused by a decline in the value of money, but it can cause a decline in the value of money, just not in every conditions (and with central banks raising interest rates when there's inflation, in practice it has the opposite effect)

Re: A Strong U.S. Dollar Weighs on the World

#13

Post by questhimay »

There's a rumor that Chinese government is going to significantly devalue the yuan https://www.bloomberg.com/news/articles/2024-04-29/yuan-deva..., to try to boost export decline from March. https://apnews.com/article/china-trade-exports-imports-b25c2....

When that happens, oh boy, that's going to be so much money flowing from China to US that it's going to make the dollar even stronger

Re: A Strong U.S. Dollar Weighs on the World

#14

Post by refurb »

avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

It’s all relative. Many, many countries effectively expanded their monetary supply during Covid.

Re: A Strong U.S. Dollar Weighs on the World

#15

Post by po »

> The yen is at a 34-year low against the U.S. dollar

I live in Japan and this has happened so quickly it's been stunning. While not much has changed domestically so far, I am hearing and starting to see foreign people question whether they could work and live here long term if it stays like this. It's fine if you are earning USD and visiting Japan (wow there are so many tourists this year) but if your salary is priced in JPY and you plan to retire in the US, it's basically impossible right now.

My understanding is that most of the pain in JPY is being caused by carry trades by the financial sector. Because they are very common currencies and most traders right now believe that both the US and JP are stuck with a wide spread in interest rates... you can borrow JPY and invest in USD and make 4-5% on it.

As an aside, I also wish we didn't use the terms strong/weak for currencies because it carries a good/bad connotation. It's just high/low and there are pros/cons to each.

Re: A Strong U.S. Dollar Weighs on the World

#16

Post by sschueller »

mitthrowaway2 wrote: post #11
avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

Also strange that this effect is to the point that the dollar gets stronger as the yen gets weaker, even though inflation in Japan has been weak and strong in the US. So the dollar's buying power weakened domestically even as it strengthened internationally.

Same im Switzerland. Our inflation is very low yet the dollar is getting stronger against the Swiss franc.

Re: A Strong U.S. Dollar Weighs on the World

#17

Post by servus45678981 »

rdm_blackhole wrote: post #8

I think the main reasons of the strong USD are: - it's status as world reserve currency - it's seen as a safe heaven - The US is still the most profitable market to launch new product - the US job market is still performing well compared to the battered economies of Europe where unemployment is starting to go back up If the ECB decides to lower interest rates before the US Fed does, then even more capital will flow i…

I still don’t get why anyone would invest in a regime like the US or China. Europe will show its glory again; no matter what. We will get back what was stolen.

Re: A Strong U.S. Dollar Weighs on the World

#18

Post by orwin »

rdm_blackhole wrote: post #8

I think the main reasons of the strong USD are: - it's status as world reserve currency - it's seen as a safe heaven - The US is still the most profitable market to launch new product - the US job market is still performing well compared to the battered economies of Europe where unemployment is starting to go back up If the ECB decides to lower interest rates before the US Fed does, then even more capital will flow i…

Weirdly, there is also a premium on US multinationals.

When you compare dividends+buybacks from UK/French/German companies to US companies, expected returns over 10years, and stock price, excluding "growth" companies (Tesla, netflix, Uber), you can see a 10 to 20% premium. Is it stability priced in?

Re: A Strong U.S. Dollar Weighs on the World

#19

Post by cherryteastain »

avidiax wrote: post #3

Seems strange that the US printed lots of money, which caused inflation, which caused high interest rates, and now causes a strong dollar. You wouldn't think that printing money leads to a stronger currency, but perhaps this is a delayed effect after you stop printing.

US printing is not the same as everyone else printing. Almost all trade deals worldwide are done in USD. Everyone except the US must export goods and services (i.e. actually work) to acquire the dollars which will finance their imports; US can just print.

Goods and services that are traded internationally are priced in USD. Other currencies do not end up directly representing goods and services; they are relative to the USD. Therefore, the demand for dollars is always very high, and it will be as long as the dollar keeps the reserve currency status.

Re: A Strong U.S. Dollar Weighs on the World

#20

Post by redox99 »

orwin wrote: post #18
rdm_blackhole wrote: post #8

I think the main reasons of the strong USD are: - it's status as world reserve currency - it's seen as a safe heaven - The US is still the most profitable market to launch new product - the US job market is still performing well compared to the battered economies of Europe where unemployment is starting to go back up If the ECB decides to lower interest rates before the US Fed does, then even more capital will flow i…

Weirdly, there is also a premium on US multinationals. When you compare dividends+buybacks from UK/French/German companies to US companies, expected returns over 10years, and stock price, excluding "growth" companies (Tesla, netflix, Uber), you can see a 10 to 20% premium. Is it stability priced in?

If given choice to invest in a US company or an EU company, all things being equal, I'd pick US any day of the week. 10% to 20% premium seems kinda low in fact.
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