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Will #COVID19 impact the global distribution of power? Will it accelerate the rise of 🇨🇳 & the decline of 🇺🇸?

My hunch: not really.

Why? Follow the money...or more precisely the $

[THREAD]
Much of what follows is based on what Carla Norrlof, @Bree_Croteau, @aashna_114, @daniel_mcdowell, @whinecough, Hongying Wang, Benjamin J Cohen, & myself wrote in a recent @ISP_Journal symposium on the continuing dominance of the US $

academic.oup.com/isp/advance-ar…
The key idea of that symposium: there are many features of the international system -- economic, financial, and military -- that anchor the dollar's strength as the world's key currency.

If anything, the economic turmoil brought about by #COVID19 is simply reinforcing the dollar-dominance.

[This is something that two of my collaborators, @daniel_mcdowell & @whinecough, have been following very closely.]
Let's start by reviewing the economic turmoil itself.

The key is that economies are shutting down in an effort to "flatten the curve" in the hope of slowing the spread of #COVID19 cases.

Source @FT: ft.com/coronavirus-la…
This is leading governments around the world to impose a growing number of restrictions on businesses being open and people being able to leave their homes

How will this impact national and global economies? @paulkrugman offers a nifty depiction of the negative shows to BOTH supply and demand

Given the global economic turmoil, what are folks (businesses, investors, governments) doing with their money?

Answer: Flying to quality!

onlinelibrary.wiley.com/doi/abs/10.111…
Typically, this has been moving money into the $ and Gold.

That is expected to be no different this time around.

cnbc.com/2019/01/25/if-…
Yes, Gold prices are surging, though with some volatility lately

Source: markets.ft.com/data/commoditi…
And there has absolutely been a flight to US Treasure bonds, as indicated by the declining yield

Source: markets.ft.com/data/bonds/tea…
More generally, seeking out of dollar denominated assets has leads to a ⬆️$

A big reason why the $ is a "safe haven" is a the actions of the Federal Reserve, which has played the role of "global lender of last resort", as it did during the 2008 financial crisis

google.com/books/edition/…
A nice overview of those actions are found in this @voxdotcom article

vox.com/2014/6/20/1807…
Though it should be kept in mind that these actions are largely informed by the Fed's lack of action during the 1930s Great Depression

google.com/books/edition/…
So what is the Fed doing now?

Several things...
#1: Injecting liquidity into other Central Banks

#3: A small-and-medium sized business lending program

What does this mean?

1) It will be less expensive for the US government to fund a stimulus package (or series of packages)

cnn.com/2020/03/25/pol…
2) Despite commentary to the contrary, the US is still perceived as an actor that, in the words attributed to Churchill, "eventually do the right thing, after exhausting all other options"
This second point stands in contrast to the new criticism China is receiving for its handling of the crisis, such as....

In short

1) The 💵is perceived as 👍

2) US dominance is based on 💵perceived as 👍

So I don't see US dominance becoming 👎

[END]
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