I want to discuss why the U.S. Dollar is surging...
This is because a massive bubble in emerging markets that formed from 2009 to 2019 has burst, which is creating a short-squeeze in Dollars.
$UUP $FXE $EEM
This is because a massive bubble in emerging markets that formed from 2009 to 2019 has burst, which is creating a short-squeeze in Dollars.
$UUP $FXE $EEM
See this thread for more details about the emerging markets bubble that is currently imploding:
The emerging markets bubble formed due to the extremely stimulative actions of central banks after the '08 Crisis.
Record low interest rates & QE caused a "tsunami of liquidity" to flow into EM bonds, pushing yields to record lows.
That created property & credit bubbles in EMs.
Record low interest rates & QE caused a "tsunami of liquidity" to flow into EM bonds, pushing yields to record lows.
That created property & credit bubbles in EMs.
Since the 2008 Crisis, institutions borrowed Dollars at very low interest rates and plowed them into higher-yield EM bonds and pocketed the difference.
Those institutions were basically "shorting" Dollars, but are now forced to scramble & pay back loans as the EM bubble bursts.
Those institutions were basically "shorting" Dollars, but are now forced to scramble & pay back loans as the EM bubble bursts.
The institutions that were shorting Dollars are now forced to buy back those Dollars at any price to pay back their loans - this is creating a short-squeeze in the Dollar (hence its surge).
They are also jettisoning EM assets, which is causing the crash in EM currencies/assets.
They are also jettisoning EM assets, which is causing the crash in EM currencies/assets.
Even before the coronavirus outbreak, I had highlighted emerging markets as one of the bubbles that would burst, leading to the coming recession/depression.
That's exactly what is happening, unfortunately...
forbes.com/sites/jessecol…
That's exactly what is happening, unfortunately...
forbes.com/sites/jessecol…
This is a gigantic U.S. Dollar carry trade bust that we're experiencing.
There were also carry trades in Canadian and Australian assets (which had higher yields like EMs).
That's why those currencies/assets are sinking so hard too.
That carry trade was behind MANY bubbles.
There were also carry trades in Canadian and Australian assets (which had higher yields like EMs).
That's why those currencies/assets are sinking so hard too.
That carry trade was behind MANY bubbles.
