🧵 The Power of the Dollar
It can lift markets or destroy entire countries.
Here's why the dollar still rules the world... and how it could all break.
It can lift markets or destroy entire countries.
Here's why the dollar still rules the world... and how it could all break.
📍 Bookmark this thread— this is the financial literacy lesson you never got in school.
Let’s make sense of the US dollar, without the boring jargon.
Here we go...
Let’s make sense of the US dollar, without the boring jargon.
Here we go...
The US makes up ~25% of global GDP.
Over 60% of central bank reserves are in dollars.
Over 80% of global trade is invoiced in dollars.
The dollar is the bloodstream of the world economy.
Over 60% of central bank reserves are in dollars.
Over 80% of global trade is invoiced in dollars.
The dollar is the bloodstream of the world economy.
So what happens when the dollar gets stronger?
Financial conditions tighten, and dollars are harder to come by:
→ Global funding costs rise
→ Emerging markets suffer
→ Commodities crash
→ Dollar-denominated debt explodes
In other words… the wrecking ball swings.
Financial conditions tighten, and dollars are harder to come by:
→ Global funding costs rise
→ Emerging markets suffer
→ Commodities crash
→ Dollar-denominated debt explodes
In other words… the wrecking ball swings.
🧠 Framework: The Dollar Smile (by Li Jen)
Dollar is strong when (both smile extremes):
→ Global panic = risk-off
→ US economy is booming
Dollar is weak when (middle of the smile):
→ Global growth is strong, capital flows to emerging markets & commodities
Dollar is strong when (both smile extremes):
→ Global panic = risk-off
→ US economy is booming
Dollar is weak when (middle of the smile):
→ Global growth is strong, capital flows to emerging markets & commodities
Before we go on, credit where it's due:
A normie like me can pass through the financial elite's jargon thanks to @RealVision
Financial intelligence democratized 24/7 in your pocket.
Join free, get an edge & silence the noise
Now, back to the dollar...rvtv.io/4cG9k5m
A normie like me can pass through the financial elite's jargon thanks to @RealVision
Financial intelligence democratized 24/7 in your pocket.
Join free, get an edge & silence the noise
Now, back to the dollar...rvtv.io/4cG9k5m
What happens in a real risk-off event where there's a mad scramble for dollars?
📉 1997 Asia Crisis
📉 2013 Taper Tantrum
📉 2022 Global Meltdown
All triggered in part by a surging dollar.
The dollar is not just a currency.
It’s a wrecking ball...
📉 1997 Asia Crisis
📉 2013 Taper Tantrum
📉 2022 Global Meltdown
All triggered in part by a surging dollar.
The dollar is not just a currency.
It’s a wrecking ball...
Why does it matter?
Because much of the world has borrowed in dollars.
→ Countries
→ Corporations
→ Banks
When the dollar rises, those debts get harder to pay...
Because much of the world has borrowed in dollars.
→ Countries
→ Corporations
→ Banks
When the dollar rises, those debts get harder to pay...
Commodities get crushed too.
Because they’re priced in dollars.
When the dollar rises, oil, copper & food become more expensive in local currency.
→ Demand drops
→ Emerging markets struggle
→ Global growth slows
Because they’re priced in dollars.
When the dollar rises, oil, copper & food become more expensive in local currency.
→ Demand drops
→ Emerging markets struggle
→ Global growth slows
Even if you don’t live in the US, the dollar dictates:
→ Your grocery bill
→ Your fuel prices
→ Your mortgage rate
→ Your country’s economy
That’s dollar hegemony in action...
→ Your grocery bill
→ Your fuel prices
→ Your mortgage rate
→ Your country’s economy
That’s dollar hegemony in action...
If you want to dive deep and understand the dollar, its dynamics, and real-life consequences, check out:
The "Dollar Milkshake Theory" by @SantiagoAuFund, aired on Real Vision 6 years ago
The "Dollar Milkshake Theory" by @SantiagoAuFund, aired on Real Vision 6 years ago
aaand a follow-up by the great @RogerHirst3, in case you need to dive deeper
🧩 TLDR:
→ The dollar is the king of global finance.
→ When it smiles, the rest of the world cries.
Understanding the dollar = understanding markets.
Ignore it at your own risk...
→ The dollar is the king of global finance.
→ When it smiles, the rest of the world cries.
Understanding the dollar = understanding markets.
Ignore it at your own risk...
@RaoulGMI with a perfect insight to wrap this up:
"A lot of people think the dollar dies from weakness, but I think the dollar dies from strength".
"A lot of people think the dollar dies from weakness, but I think the dollar dies from strength".
Thank you for getting here!
Now that you understand the dollar, read below how Donald Trump plans to devalue it and restructure global trade.
It's economic warfare... It's the Mar-a-Lago Accord 👇
Now that you understand the dollar, read below how Donald Trump plans to devalue it and restructure global trade.
It's economic warfare... It's the Mar-a-Lago Accord 👇
https://x.com/paulguerratv/status/1919927345395159123
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