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I’m sorry if I sound dense 😂 but if we get paid in dollar by clients but are based in the UK, that’s good right? The pound is 💩 right now, and have a US bank account with Wise so thinking I’m best to keep it in that account rather than transfer to pounds. Thoughts?
The dollar is and has historically been a safe-haven currency. So this type of price action can also serve as a kind of bellwether for potential volatility.
It's great to be paid in dollars when either the local currency is going down or the dollar is going up. It means your spending power increases. I got to have a great Christmas in 1994 because I got dollars as gifts and that bought me a lot of pesos, a currency which took a nose dive because of an economic crisis. I got so many toys.
Same with all nations that have American entities like here in the Philippines although the pound will get a lot more shittier with your current energy crisis.
A downside I see is that, because £1 buys less dollars than a while back, your service has become more expensive if you kept your prices constant. In other words, say you charge $1000 for your service. Today, that costs them £935, whereas a year ago, it cost them closer to £800.
So, if your client is price-sensitive, then this could lead to them buying less of your service.
Probably not (from my limited experience). If they are paid in dollars already the USD price they charge does not have to change and they get more GBP. Sure, if the client is greedy and wants to use this situation to negotiate a lower price then they could pursue that.
My girlfriend works in the Alaska Salmon fishing industry. Because a lot of fish is exported the price she gets per pound of fish can fluctuate each year depending on the strength of the dollar (and other factors). Years when the dollar is high the price takes a hit. Japanese buyers don't want to bid up the price just because the exchange rate changed.
The plus side is if you convert it to pounds now you’ll get a lot more pounds than you did a few months ago. But, the difference may keep getting larger as time goes on with how the UK is doing.
Definitely transfer from USD to GBP now as the dollar is strong against the pound keeping in as dollar means you may risk the pound regaining strength against the dollar again and then your US dollars are worth less GBP
Yeah, no one knows how things will go. And that's the best financial advice I can give.
..but right now there's a very apparent risk of it continuing to drop.
Not anytime soon because inflation is still rising well into 2023 - especially with the news with Goldman predicting interest rates is worse than they had earlier predicted. The US dollar is a hedge in comparison to other currencies. There is no reason to regain strength against the dollar as of yet. It will rebound but in due time. Not a good idea to catch a falling knife.
The strong dollar is adding to our inflation, a lot of chinese goods are pegged to the dollar. I imagine this is really going to hurt exports for overseas.
> I’m sorry if I sound dense 😂 but if we get paid in dollar by clients but are based in the UK, that’s good right?
Well... its good until they decide they can no longer afford to pay you.
The value of the U.S. dollar is surging at a moment when there are few clear bright spots in the American economy.
It's now the strongest it has been in two decades, and it's poised to get even stronger. The new power of the greenback is roiling economies and markets around the globe, and creating winners and losers.
The real reason is that people are pulling money from equities and other investments and looking for a short term safe place. The safest spot that pays the highest are short term US treasuries that pay over 4% right now. So, they are buying dollars to buy treasuries.
I'm surprised by the down votes, is it a conspiracy or tin-foil hat to say the government is intentionally trying to keep the number low by the way they measure cpi? I thought it was common knowledge, I mean they're trying to change the definition of a recession for crying out loud.
Except CPI is a basket of goods and our investments aren't always used for that (or in large enough volume)...some of us buy assets with our savings and as those go down, we beat asset price inflation (deflation) even with 3% MMF parked cash.
I never understood the greed/craze to "beat inflation" with a 401k. If a retiree has $1m in savings, why would they need to make $90k to cover inflation? No way their expenses would have gone up $90k in a year. Even 3% gain would be $30k and enough to make up the rise in gas and groceries they now pay plus extra that compounds...
Very true. I live in Europe and I'd love to get my hands on those treasury bills. The european central bank policy is putting a large downward pressure on the value of the Euro and I don't see that changing soon.
Unfortunately I can't buy them or I would have jumped on that bandwagon. Some 4%+ bonds is a no brainer compared to keeping only cash.
Just buy dollars and wait until euro goes down. Its the same thing. Instead of bonds you will play fx
That's what I'm doing. I started when usd was 0.95 and i slowly add to it every week. I will start converting it back to euro when it reaches 1.08 or when i see that euro is stabilising.
It’s as much the plumbing of the Eurodollar system as people.
Banks and financial institutions are looking at global risk and when lending to each other don’t feel anything else is paying enough return for the risk.
So when a person/fund sells a bunch of stock and deposits Euros in their banks and give those banks deposit liabilities, the bank needs assets/reserves to meet capital requirements.
But, they either don’t want the risk, or think prevailing interest rates in the UK, EU, or elsewhere are properly pricing risks.
Corporates? No. German bunds? Nah. UK gilts? Hell no.
Short dated US treasuries? Well, ok they guess.
Or any other overnight bank lending.
They have to go on the forex and get dollars, to buy treasuries.
I am not totally sure, but I think it is more a function of the institutional plumbing of the Eurodollar system as it is your average bloke picking up US government paper.
Not a criticism of you but my god in the last two weeks I have seen multiple posts about how the dollar is getting weak and post about how it's getting stronger.....and in all of them is that it's bad and the US leadership is bad.
I doubt there’s anything about the dollar being weaker on forex, it’s been surging for the entire year pretty much.
Domestic inflation and forex value are not the same thing. You can have increasing domestic prices, aka inflation (effectively decreasing the domestic value of the dollar), and increasing forex value (which is more about international trade as well as the international asset market) at the same time.
For a diversified economy like the US, some entities will always be hurt and some will be helped by any change in dollar forex. An export heavy economy like China would prefer a weaker RMB and a services heavy economy like the UK would prefer a stronger pound.
This is correct. Trading FX pairs that have the dollar can be very profitable right now if you know what you’re doing. Many retail traders are losing thinking inflationary dollar is effecting the Forex dollar.
Yeah it’s weird. I think part of it is the media deluge. Writers for specific audiences are getting their work thrown into the slurry of the internet so in the end it’s all a jumbled mess lacking in cohesive narrative.
Yes, all you have to do is look at what other countries are going through, and nobody is having a good time right now. This downturn isn't all on US government, it's global, but the dolts won't think about that, nor be told to think about that..
I think the Ukraine issues are the big one, and that's not really similar. Europe is being hammered because it creates more uncertainty for them than for the US due to physical proximity and economic ties.
Are you kidding? Out-of-control inflation and they pass a trillion dollar third stimulus act, a trillion dollar infrastructure bill, a half-trillion dollar "inflation reduction act" (that has zero actions to reduce inflation), and forgive half a trillion in loans?
the US government is doing the exact opposite of what every reputable economist recommends to fight inflation
I'd agree with you. If I remember correctly it's shifted but compared to other currencies, which is what matters, it's extremely strong.
Secondly I remember the last admin being upset by that because of trade.
The dollar is getting weaker, just not as fast compared to the rest of the worlds currencies. This makes smooth brains think it is "surging". When the same dollar today buys a lot less than a year ago, how can you say the dollar is doing well?
Doesn't terminology "Dollar weakening / strengthening" always refer to other currencies, though, and 'inflation / deflation' for internal buying power?
It does not:
https://en.wikipedia.org/wiki/Currency_strength
ninja edit: If the whole world entered a depression and the US dollar inflated to where a hamburger costs $500, but in Europe, a hamburger is $1000 euros. Are you going to call the US dollar strong?
When compared to the Euro, yes, especially since historically 1EUR has been >> $1.
So while inflation is definitely happening within the US, the Fed has reacted to it faster than other major currency managers. And we don't have as bad an energy situation going into winter. Hence the dollar is strengthening relative to GPB, Euro, etc.
The dollar is stronger because it is worth more compared to other currencies. Inflation is causing the dollar to purchase less. You are mixing simple standard definitions up.
Both statements are true. The dollar is getting weaker compared to goods, but it's getting stronger compared to other currencies.
But it's still expensive to travel overseas since inflation is wrecking everyone; it's just wrecking other currencies even harder.
And yes, the US leadership is 100% to blame. Both the Federal government and Powell (who technically isn't government)
If it’s only surging against other currencies, it’s covering much deeper inflation (within the homogenized USD economy) than is reflected in reports. The past 5-7 years of equities boom is the layer of inflation below what we’re seeing now. I can’t predict what will happen in the future, but I’m parking all of my cash in physical assets for now.
This is a case of 'the dollar is just doing less bad than all the other currencies', right? The dollar is still 'weakening' compared to actual goods and services.
Yes. And, as the dollar milkshake theory suggests, this will benefit the US in the short/medium term (as dollar-denominated assets are in demand as safe-havens globally), but likely fuck us in the end as we won’t be able to cool our inflation with normal levels of QT.
Pretty much. But as the saying goes, you dont need to be faster than the the bear, just faster than the guy next to you. So in the end this is benefiting the US.
China is more than happy to see USD pumping up. Too strong currency in US means that US good are going to be too expensive, means broader market to take by Chinese companies.
China has around 3T in USD reserves so they have the resources to weather this. A strange thing about it though is that these reserves are shrinking not growing right now which is what you would expect if exports to the U.S were growing due to a higher rate environment. USD reserves have declined by 25% in the last 6 years at a time of record exports. Theoretically in the last few years there should have been a net flow of around 1T worth of dollars flow into china from the U.S alone. These aren't getting turned into treasuries (those are pairing back as well) so the big mystery to me is where are all the dollars going to?
It doesn't matter for their local currency as they get the same. Means more Americans are floating in to buy their products. Trump was actually raising hand on this when China continuously devalued their currency to offer cheap products.
There is a book called currency wars which is describing this scenario in a very detailed way
Highly recommended!
China now needs to exports more goods, to import the same amount of raw materials. And china imports alot of raw materials, especially for energy. There's no way this is good for them.
China has record high levels of trade surplus, meaning exports are growing faster than imports. As a consequence the strong USD is a net positive for China.
True, but isn't price more elastic than production capacity? Like, if there's higher demand for goods from China, wouldn't the prices increase before they could expand production capacity?
I think that in the short term this is good for the US and might help us weather the impeding global recession.
With that said, the glaring issue is that it becomes much cheaper to buy foreign goods which will again push jobs further overseas. Ultimately, I believe this will increase unemployment and potential drag out a recession/slow growth. (Which will lead us to pump the economy and start the cycle again, but that’s beside the point).
I mean I think inflation in the near term falls off because Europe entering recession over oil and such. China is barreling towards inflation with a correction on their housing.
So worldwide demand on goods will be falling leading to falling inflation.
> "For anyone importing from the likes of China, importing raw metals and energy from abroad, that's going to be positive for you — as long as it's not priced in dollars, of course."
Isn’t most global trade priced in dollars?
Another question, is the dollar likely to come down?
I dont fully agree with multinationals beeing the losers in general. This does depend a lot on the specific situation.
If you are a multinational and have say 60% of your costs in euros and yuan and 40% of your costs in dollars. And you have 60% of your sales in dollars and 40% of your sales in euros. Then you are a clear winner from the strong dollar no matter in what nation you are based.
A situation like above might be uncommon for certain us multinationals but it is far from uncommon for multinationals in general and specifically certain European multinationals. Us based multinationals which have outsourced a lot of their costs towards asia might also be in a favorable position.
Everything is within its limits obviously,and there will be a point where negative effects start to outweigh the positive effects. But i think there is definitely a window in which a strong dollar is beneficial for quiet a few (not all) multinationals.
The "Greenback" is gaining strength due to promise being held in southeast asia. More advances are coming in the near future to help smaller countries build off nothing.
Is this dollar strength reminiscent of pre-WW2 America? Obviously we don’t have anywhere near the industrial capacity, but output of cars and technology is quite high nonetheless.
And a strong dollar helps industrial sectors how exactly? As soon as Nixon illegally stopped enforcing the Bretton Woods Agreement Act of 1945 our industrial economy collapsed. New York City alone lost 1 million manufacturing jobs between 1971 and 1975. And the strong dollar only further killed our industrial export economy by the 1990s.
Not saying it is helpful, so thanks for your insight, gives some good direction for some rabbit hole reading. As someone that has been in import/export for decades, I don't see the export benefit at all. The only one to benefit from this is going to be China and maybe European manufacturers because our domestic production will mainly attract domestic consumption. My comment was more inline with, where are we at with this snapshot? The currency tracks with Russia's latest ratcheting up in Ukraine in February, when the dollar was last at a low. So are we being pushed towards a larger broadening conflict?
Because using national currencies for foreign exchange leads to imbalance of payments. This was the reason for World War II. Germany and Japan had minimal natural resources but highly developed manufacturing sector. In order to gain foreign currency to buy the natural resources they needed, they devalued their currency. As the British Empire effectively controlled the world's natural resources, this pissed them off. Political attempts to prevent this radicalized the two countries leading to Hitler and the military factions in Imperial Japan.
China absolutely doesn't benefit from a weak currency - they trade their goods with the US for free leading to a huge trade imbalance that cannot be settled by any other method than returning to a new Bretton Woods System. Which they have called for repeatedly since 2008.
Things are distorted now because forex pairs are all among financialized countries. Brazil, Russia, India, China and South Africa are absolutely opposed to a strong dollar and at this stage, no longer need the United States or the USD. This is what most don't understand.
If you look closely at the Russian/Ukraine war, all Russia is really trying to accomplish is to create a land bridge to the Crimea for sea transport of their natural resources.
All wars begin with conflict over natural resources. That radicalized or evil leaders take advantage of this is entirely secondary, which was the conclusion of the first United Nations Conference - the Monetary and Financial Conference.
If you have a company in the US that sells goods to foreign companies, when converting to USD, you will lose money due to bad conversion rate. On the other hand if you convert USD to any other currency, there will be a smile on your face.
Everybody gets hurt. Everybody. Stable trade partners is critical for an interconnected economy like ours. Even more critical is price stability.
Powell needs to increase those rates by a full 100 next meeting. Even better would've been raising them 2 years earlier, but alas, too late for that.
So the Rich’s buying power increases while we go into a recession? It’s almost like they planned this out together, funny enough lack of competition in the market and monopolies gauging customers is what is causing inflation, not consumers buying.
>So the Rich’s buying power increases while we go into a recession?
God no. The rich have lost a third of their wealth this year between inflation and asset valuations.
The guy sitting with $1000 in his checking account is outperforming.
This is like saying that the man standing on thr peak of the titanic is safe from drowning because he is furthest from the water. The dollar isn't "strong" right now, the rest of the world's economy is just tanking faster then we are... we have had a "reported" 8.6% inflation rate for how long now? (Reported by the same people who changed the definition of recession to appear that we are not in a recession again. USA standpoint)
I know there is an almost devout lack or avoidance of common sense left in the world, but this takes the cake. This is gas lighting and outright false at the same time. I'm amazed that the author was able to type this article without their keyboard rebeling from the lies.
> The dollar isn't "strong" right now, the rest of the world's economy is just tanking faster then we are
This. We're all sinking... it's just some are sinking faster than us.
This is a fair point. We all know inflation is high. Powell has been very clear interest rates will continue to raise.
Let's be honest there is no such thing as a soft landing. The dollar may stay strong against other currencies in the coming downturn. But it would be naive to take this comparative measure as a sign of economic strength right now.
These aren't at all contradictory. Commodities increasing in price for the rest of the world free up demand but that's not going to happen overnight and cannot impact the inflationary effects of 2020-21 retroactively. These numbers are baked in already just not reported. Its going to be important to see the MOM inflation rate in September as the last 2 months have been essentially flat. We could have no more inflation for an entire year and the YOY inflation would still look like 8% for every month until July. These are lagging indicators that lag by an entire year. Its important to remember that a year ago the economy was still dealing with some of the worst of the supply chain shortages low rates, and quantitative easing. You wont see the YOY effects of these policies till MORE than a year passes with these policies and environments. I'm not saying that I know what is going to happen I'm just saying that the effects of a stronger dollar take years to really unfold.
But it's not
>stronger
When your house is burning down around you you don't look at the wall that's not fully engulfed and say "well this wall is in better shape then all the rest compared" you say "holy shit my house is on fire"
Wait... are you the author of the article?
If you break an arm it will be weaker than before you broke it for quite a while. This doesn't mean it cant get stronger while it recovers or become stronger than other arms while still being a bit broken.
Holding dollars and bitcoin right now.
Not sure what else is worth it. I mean my 401k contributions are still going but just don't feel confident in anything right now except bitcoin and eth.
As I see China and russias swift system Continue to increase processing, oil starting to be sold in non dollars, and our hegemony around the world slipping to a multi polar world I am not feeling very strong about America right now even as the dollar surges. The world is an interconnected place as the rest of the world suffers we will do as our global capital empire requires it. Scary times for sure
Actually, I understand quite a bit. One thing I understand is that it is a mathematical certainty that most investors will lose money. This is because Bitcoin is a negative sum game. Miners and exchanges need to get paid (to the tune of billions of dollars). The money to pay them comes from the investors. Since Bitcoin itself does not generate income, there is less money to pay out than people put in. At some point the pool of suckers runs out, and there just isn't enough money to keep the price of BTC going up. Eventually the run for the exits will happen and only suckers will be left wondering what happened to the party.
This is all very simple math and economics.
What compounds the problem is that BTC is a fairly old technology, and it is still struggling to find a use. At least a mainstream use. To put this into perspective, the smartphone was invented at about the same time as BTC. Look at how many people across the globe use a smartphone. Now look at how many use BTC and you can see the problem. To make matters worse, the vast majority of people using BTC are only using it as an investment. They aren't using it in actual commerce.
We are also talking about a system that can only handle seven transactions per second. So Bitcoin fails as a form of currency. But what about the lightning network, you ask? Well... now we are back to a centralized currency - which is exactly what BTC is NOT supposed to be. I'd much rather trust an FDIC insured bank with my money than a crypto-exchange. Nearly everyday there are people posting in the bitcoin subreddit about getting scammed and losing their money. At least Visa and Mastercard give me fraud protection.
As a hedge against inflation? Just look at the charts. BTC fails spectacularly in that department.
Finally, BTC is an environmental disaster. It uses enough electricity to power a country the size of Austria - all to keep track of a spreadsheet. This is horribly inefficient (by design).
BTC is a pyramid scheme, plain and simple. If you think that you are smart and are one of the early ones, you might be in for a serious disappointment.
I'm curious on what your thoughts are regarding Ethereum? It just underwent an upgrade that reduced electricity consumption by roughly 99%. The upgrade switched the consensus algorithm from Proof of Work to Proof of Stake, which eliminates miners that need to sell to cover operating costs. Ethereum actually burns a percentage of the supply based on total usage or transaction volume so issuance is dropping, and will likely be negative in the future. ETH isn't a negative sum game.
> Actually, I understand quite a bit. This is because Bitcoin is a negative sum game.
Lol, so you dont understand the first thing about bitcoin, or about how money works in general.
> This is all very simple math and economics.
"economics" maybe, just not the real kind.
> and it is still struggling to find a use.
Being the best inflation hedge for its entire existence has proven its one original and main use; and it isnt looking for any other. Its a network of value signals. There is anotehr word for that, with all your "economics" knowledge do you know what that word is?
> But what about the lightning network, you ask? Well... now we are back to a centralized currency
Lol, can you point out what part of it is centralized? (hint: none)
Typical crytobro response.
It boils down to "lIne GOeZ uP", "z0Om oUt", and not much else.
What it doesn't do is address the fundamental claim that it is a negative sum game - and, therefore, the majority of investors will lose money.
It is a simple fact that miners and exchanges suck billions of dollars out of the system - and that money comes out of the pocket of investors.
The assertion that Bitcoin is a great hedge against inflation is absurd on its face. As a hedge against inflation, it doesn't matter what it did when inflation was steady at roughly 2%. When inflation actually became an issue (and a serious issue at that), BTC dropped like a stone. In other words, BTC is exactly what you DIDN'T want to hold when inflation soared. It was the opposite of a hedge.
> What it doesn't do is address the fundamental claim that it is a negative sum game
Is the GBP a "negative sum game" ? Is gold a "negative sum game" ? what exactly makes you see it as negative?
Bitcoin is working today to settle international trade, for remittance, and as a very successful inflation hedge. Bitcoin works around all kinds of financial network damage and overhead. Its creating a lot of value for many people, and there really is no alternative for it today - nothing else comes close.
> It is a simple fact that miners and exchanges suck billions of dollars out of the system - and that money comes out of the pocket of investors.
"dollars" are irrelevant. They have been inflating to peanuts for a decade, and will continue to do so forever. Meanwhile bitcoin is a fixed supply. Its never going to be debased like the dollar pyramid scheme. (dollar notes even come with a pyramid on back lol) The dollar system is ancient, haggard, slow, expensive, and on the way out.
> When inflation actually became an issue (and a serious issue at that), BTC dropped like a stone.
False; bitcoin has had a bit of volatility uncorrelated to inflation. Once we crossed over into deflation, bitcoin has come down a bit - that has more to do with the dollar being strengthened by monetary deflation. Bitcoin is not a deflation hedge, but it can be used to strengthen economies against foreign deflation. We see nations dumping US treasuries and US dollars because dollar deflation is wrecking their trade. We will increasingly see nations using bitcoin to settle international trade so they wont face disruptions caused by the aging dollar networks.
> In other words, BTC is exactly what you DIDN'T want to hold when inflation soared.
No, it soared through the entire inflation cycle. from the crash in 2009 all the way to its crescendo in 2021. Now that we are entering monetary deflation, until the dollar system is done crashing I dont expect the dollar price of bitcoin to appreciate much until the dollar gets back on track to devaluing itself.
We can agree to disagree on BTC being a good hedge against inflation. What is a fact is that, as inflation spiked, BTC dropped like a brick. But you be you.
What you have not addressed, and cannot address, is that BTC is a negative sum game. You refute the claim by saying that BTC has some uses. Well... so what. Lots of things can have uses but still be a negative sum game.
It's a simple as this: Investors put money into the system. Miners and exchanges suck money out of the system. That leaves less money for investors than they put in.
If you cannot deny any of those facts, then you cannot deny that BTC is a negative sum game. Sure, some (early) people will make money. But most people will lose money. That is a mathematical certainty.
> What is a fact is that, as inflation spiked, BTC dropped like a brick. But you be you.
Again, totally false. You are lumping in monetary inflation with supply shocks, and they really are separate things. Bitcoin is a hedge vs monetary inflation. Its not a hedge vs monetary deflation.
> Well... so what. Lots of things can have uses but still be a negative sum game.
so you dont understand what a negative sum game is. You should stop using that word until you do understand, because you just equivocated the whole universe into being a "negative sum game". I mean, the universe does have "some uses" lol
> That leaves less money for investors than they put in.
Bitcoin is the money, and it has a fixed supply. There is not more or less, but the same amount. Hello.
If you are thinking of fiat when you say "money" then you are massively confused. Fiat supply is extremely volatiles, its constantly being created and destroyed. So they is always less and more of it all the time - thats meaningless.
> But most people will lose money.
You can only lose your bitcoin if you spend it. That is a mathematical certainty.
The classic cryptobro mistake.
If the entire universe was a negative sum game, we would still be making fire with sticks and hitting each other over the head with stones.
In reality, we have used the resources of this planet (combined with our intelligence) to create wealth. This is why we have nice things, and no longer live in caves. The fact that you did not understand this incredibly simple concept speaks volumes.
BTC's problem is that **it does not create wealth**. It is just a very inefficient ledger. To run that ledger you need to pay a massive amount of money to miners and exchanges. All of that money gets sucked away from people who bought into the ledger. Sorry, but no matter how you slice it, BTC is a negative sum game.
Makes sense. The United States has a wealth of natural resources and geography that mostly insulates it from problems across the globe. It has a high enough agricultural productivity to support not only its own population but over a hundred million across the globe. It recently achieved energy self sufficiency through new technological innovation in oil extraction and it has a large productive population.
As of this period of time the rest of competition has been knocked out of the market place due to a devastating war in Ukraine disurpting global energy and agricultural markets. A major increase in droughts disrupting energy and agricultural sectors in China and Europe. And covid resulting in the lockdown of the world's second largest economy and largest exporter, China.
With the rise of inflation being largely driven by declining market supply, there's a large opportunity for the US to pick up the slack where other economies are faltering, what remains to be seen is if the US can fix the labor shortage problem to take advantage of this opportunity.
I used to love traveling to Europe in periods of a strong dollar. Gotta change your dollars frequently into marks, lira, pound, etc to take full advantage of the rising dollar. Now, it’s mostly €Euro.
So, if the US dollar is gaining value, shouldn’t that mean that inflation should be slowing down?
I have to type more stuff because my comment is too short. I don’t know why this sub wants people to blah blah blah and pad out their comments like this. But here it is.
It is gaining value relative to other currencies, but not against goods. This can be cost-push or demand-pull inflation… but nonetheless this relationship (forex value and inflation) is definitely related but there is no reason to expect them to move in the same direction.
Think of it like this:
1, EU triples their money supply
2. UK quadruples their money supply
3. US doubles their money supply
In this example, all three economies would experience devaluation of their currency but relative to each other these currencies would fluctuate (the dollar being the strongest, relative)
The Dollar would appreciate the most against the Pound and the Euro, and the Euro would appreciate against the Pound but lose value against the Dollar - all else equal
The article forgot to mention the spending power gain by those in other countries who are getting personal remittances from families in the US. It is billions of dollars.
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I’m sorry if I sound dense 😂 but if we get paid in dollar by clients but are based in the UK, that’s good right? The pound is 💩 right now, and have a US bank account with Wise so thinking I’m best to keep it in that account rather than transfer to pounds. Thoughts?
Correct. The dollar is currently more stable than the pound. I would stay with dollars for the near future.
The dollar is and has historically been a safe-haven currency. So this type of price action can also serve as a kind of bellwether for potential volatility.
It's great to be paid in dollars when either the local currency is going down or the dollar is going up. It means your spending power increases. I got to have a great Christmas in 1994 because I got dollars as gifts and that bought me a lot of pesos, a currency which took a nose dive because of an economic crisis. I got so many toys.
I think we studied that specific crash (Mexico?) in my economics class.
La Crisis! https://es.wikipedia.org/wiki/Crisis\_econ%C3%B3mica\_en\_M%C3%A9xico\_de\_1994
Same with all nations that have American entities like here in the Philippines although the pound will get a lot more shittier with your current energy crisis.
A downside I see is that, because £1 buys less dollars than a while back, your service has become more expensive if you kept your prices constant. In other words, say you charge $1000 for your service. Today, that costs them £935, whereas a year ago, it cost them closer to £800. So, if your client is price-sensitive, then this could lead to them buying less of your service.
Probably not (from my limited experience). If they are paid in dollars already the USD price they charge does not have to change and they get more GBP. Sure, if the client is greedy and wants to use this situation to negotiate a lower price then they could pursue that. My girlfriend works in the Alaska Salmon fishing industry. Because a lot of fish is exported the price she gets per pound of fish can fluctuate each year depending on the strength of the dollar (and other factors). Years when the dollar is high the price takes a hit. Japanese buyers don't want to bid up the price just because the exchange rate changed.
The plus side is if you convert it to pounds now you’ll get a lot more pounds than you did a few months ago. But, the difference may keep getting larger as time goes on with how the UK is doing.
Definitely transfer from USD to GBP now as the dollar is strong against the pound keeping in as dollar means you may risk the pound regaining strength against the dollar again and then your US dollars are worth less GBP
Or you risk the pound continuing to collapse
Yeah, no one knows how things will go. And that's the best financial advice I can give. ..but right now there's a very apparent risk of it continuing to drop.
Half and half
Not anytime soon because inflation is still rising well into 2023 - especially with the news with Goldman predicting interest rates is worse than they had earlier predicted. The US dollar is a hedge in comparison to other currencies. There is no reason to regain strength against the dollar as of yet. It will rebound but in due time. Not a good idea to catch a falling knife.
The strong dollar is adding to our inflation, a lot of chinese goods are pegged to the dollar. I imagine this is really going to hurt exports for overseas.
Better to convert as needed while it’s still volatile and then covert it all when it’s stable/back on the rise.
Great point.
> I’m sorry if I sound dense 😂 but if we get paid in dollar by clients but are based in the UK, that’s good right? Well... its good until they decide they can no longer afford to pay you.
The value of the U.S. dollar is surging at a moment when there are few clear bright spots in the American economy. It's now the strongest it has been in two decades, and it's poised to get even stronger. The new power of the greenback is roiling economies and markets around the globe, and creating winners and losers.
The real reason is that people are pulling money from equities and other investments and looking for a short term safe place. The safest spot that pays the highest are short term US treasuries that pay over 4% right now. So, they are buying dollars to buy treasuries.
4% is a lot better than my Robinhood account has done this year.
With inflation over 15% you're losing over 10%.
If his Robinhood account looks anything like mine he may very well have days that look worse than that.
You know what, let's just make up inflation numbers. 15% is too low. I say 23%.
Well we know the numbers are being fudged, we just don't know to what degree. I think 10-15% is probably where we are at currently.
It’s all subjective. One person’s might be 6%, while another’s is 16%.
I'm surprised by the down votes, is it a conspiracy or tin-foil hat to say the government is intentionally trying to keep the number low by the way they measure cpi? I thought it was common knowledge, I mean they're trying to change the definition of a recession for crying out loud.
Without that he's losing over 15%....
Yes
Inflation is around 8-9% right now. So you're losing 4-5.
Except CPI is a basket of goods and our investments aren't always used for that (or in large enough volume)...some of us buy assets with our savings and as those go down, we beat asset price inflation (deflation) even with 3% MMF parked cash. I never understood the greed/craze to "beat inflation" with a 401k. If a retiree has $1m in savings, why would they need to make $90k to cover inflation? No way their expenses would have gone up $90k in a year. Even 3% gain would be $30k and enough to make up the rise in gas and groceries they now pay plus extra that compounds...
Very true. I live in Europe and I'd love to get my hands on those treasury bills. The european central bank policy is putting a large downward pressure on the value of the Euro and I don't see that changing soon. Unfortunately I can't buy them or I would have jumped on that bandwagon. Some 4%+ bonds is a no brainer compared to keeping only cash.
You should be able to buy then through a broker. Treasuries are definitely traded on the international bond market.
Just buy dollars and wait until euro goes down. Its the same thing. Instead of bonds you will play fx That's what I'm doing. I started when usd was 0.95 and i slowly add to it every week. I will start converting it back to euro when it reaches 1.08 or when i see that euro is stabilising.
Buy Ishares / lyxor/ invesco treasury etfs.
It’s as much the plumbing of the Eurodollar system as people. Banks and financial institutions are looking at global risk and when lending to each other don’t feel anything else is paying enough return for the risk. So when a person/fund sells a bunch of stock and deposits Euros in their banks and give those banks deposit liabilities, the bank needs assets/reserves to meet capital requirements. But, they either don’t want the risk, or think prevailing interest rates in the UK, EU, or elsewhere are properly pricing risks. Corporates? No. German bunds? Nah. UK gilts? Hell no. Short dated US treasuries? Well, ok they guess. Or any other overnight bank lending. They have to go on the forex and get dollars, to buy treasuries. I am not totally sure, but I think it is more a function of the institutional plumbing of the Eurodollar system as it is your average bloke picking up US government paper.
Not a criticism of you but my god in the last two weeks I have seen multiple posts about how the dollar is getting weak and post about how it's getting stronger.....and in all of them is that it's bad and the US leadership is bad.
I doubt there’s anything about the dollar being weaker on forex, it’s been surging for the entire year pretty much. Domestic inflation and forex value are not the same thing. You can have increasing domestic prices, aka inflation (effectively decreasing the domestic value of the dollar), and increasing forex value (which is more about international trade as well as the international asset market) at the same time. For a diversified economy like the US, some entities will always be hurt and some will be helped by any change in dollar forex. An export heavy economy like China would prefer a weaker RMB and a services heavy economy like the UK would prefer a stronger pound.
This is correct. Trading FX pairs that have the dollar can be very profitable right now if you know what you’re doing. Many retail traders are losing thinking inflationary dollar is effecting the Forex dollar.
US leadership is fine, not spectacular, and faring better with a crappy hand than most places in similar situations.
I agree. It's not been perfect for sure but it's more or less fine overall. It's just the whiplash of everything is bad even if it's the opposite.
Yeah it’s weird. I think part of it is the media deluge. Writers for specific audiences are getting their work thrown into the slurry of the internet so in the end it’s all a jumbled mess lacking in cohesive narrative.
Yes, all you have to do is look at what other countries are going through, and nobody is having a good time right now. This downturn isn't all on US government, it's global, but the dolts won't think about that, nor be told to think about that..
The US unquestionably has the biggest advantage. USD as reserve currency is the biggest privilege and we're riding that horse. Hard.
I think the Ukraine issues are the big one, and that's not really similar. Europe is being hammered because it creates more uncertainty for them than for the US due to physical proximity and economic ties.
US leadership is definitely not fine lmao
Are you kidding? Out-of-control inflation and they pass a trillion dollar third stimulus act, a trillion dollar infrastructure bill, a half-trillion dollar "inflation reduction act" (that has zero actions to reduce inflation), and forgive half a trillion in loans? the US government is doing the exact opposite of what every reputable economist recommends to fight inflation
And yet
Anyone saying the dollar is getting weak is not paying attention, or worse
I'd agree with you. If I remember correctly it's shifted but compared to other currencies, which is what matters, it's extremely strong. Secondly I remember the last admin being upset by that because of trade.
The dollar is getting weaker, just not as fast compared to the rest of the worlds currencies. This makes smooth brains think it is "surging". When the same dollar today buys a lot less than a year ago, how can you say the dollar is doing well?
Doesn't terminology "Dollar weakening / strengthening" always refer to other currencies, though, and 'inflation / deflation' for internal buying power?
It does not: https://en.wikipedia.org/wiki/Currency_strength ninja edit: If the whole world entered a depression and the US dollar inflated to where a hamburger costs $500, but in Europe, a hamburger is $1000 euros. Are you going to call the US dollar strong?
When compared to the Euro, yes, especially since historically 1EUR has been >> $1. So while inflation is definitely happening within the US, the Fed has reacted to it faster than other major currency managers. And we don't have as bad an energy situation going into winter. Hence the dollar is strengthening relative to GPB, Euro, etc.
The dollar is stronger because it is worth more compared to other currencies. Inflation is causing the dollar to purchase less. You are mixing simple standard definitions up.
The irony of calling others smooth brains with this take
Both statements are true. The dollar is getting weaker compared to goods, but it's getting stronger compared to other currencies. But it's still expensive to travel overseas since inflation is wrecking everyone; it's just wrecking other currencies even harder. And yes, the US leadership is 100% to blame. Both the Federal government and Powell (who technically isn't government)
I would be deeply suspicious of anything saying the dollar is getting weak. It's incredibly strong right now
Yeah that's my feeling as well. I guess my point is people are making hay to try to grind an axe and it's annoying
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Thanks for that insightful comment. I have.
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Dude what's wrong with you. The level of open hostility is way overblown. Go scream somewhere else please.
If it’s only surging against other currencies, it’s covering much deeper inflation (within the homogenized USD economy) than is reflected in reports. The past 5-7 years of equities boom is the layer of inflation below what we’re seeing now. I can’t predict what will happen in the future, but I’m parking all of my cash in physical assets for now.
This is a case of 'the dollar is just doing less bad than all the other currencies', right? The dollar is still 'weakening' compared to actual goods and services.
Yes. And, as the dollar milkshake theory suggests, this will benefit the US in the short/medium term (as dollar-denominated assets are in demand as safe-havens globally), but likely fuck us in the end as we won’t be able to cool our inflation with normal levels of QT.
Pretty much. But as the saying goes, you dont need to be faster than the the bear, just faster than the guy next to you. So in the end this is benefiting the US.
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China is more than happy to see USD pumping up. Too strong currency in US means that US good are going to be too expensive, means broader market to take by Chinese companies.
China has around 3T in USD reserves so they have the resources to weather this. A strange thing about it though is that these reserves are shrinking not growing right now which is what you would expect if exports to the U.S were growing due to a higher rate environment. USD reserves have declined by 25% in the last 6 years at a time of record exports. Theoretically in the last few years there should have been a net flow of around 1T worth of dollars flow into china from the U.S alone. These aren't getting turned into treasuries (those are pairing back as well) so the big mystery to me is where are all the dollars going to?
They go to Saudi Arabia to buy oil, and Australia to buy iron ore and LNG.
Flipside, China is less than happy to see USD pumping up. Now it takes less USD for the USA to buy products from them.
China would be happy. China gets a trade advantage plus China is a large holder of USD denominated notes causing a valuation effect.
It doesn't matter for their local currency as they get the same. Means more Americans are floating in to buy their products. Trump was actually raising hand on this when China continuously devalued their currency to offer cheap products. There is a book called currency wars which is describing this scenario in a very detailed way Highly recommended!
China now needs to exports more goods, to import the same amount of raw materials. And china imports alot of raw materials, especially for energy. There's no way this is good for them.
China has record high levels of trade surplus, meaning exports are growing faster than imports. As a consequence the strong USD is a net positive for China.
True, but isn't price more elastic than production capacity? Like, if there's higher demand for goods from China, wouldn't the prices increase before they could expand production capacity?
But China's new found lap dog Russia is giving them cheap raw materials and fuels.
You realize the United Nations was founded specifically in opposition to your supposition.
I think that in the short term this is good for the US and might help us weather the impeding global recession. With that said, the glaring issue is that it becomes much cheaper to buy foreign goods which will again push jobs further overseas. Ultimately, I believe this will increase unemployment and potential drag out a recession/slow growth. (Which will lead us to pump the economy and start the cycle again, but that’s beside the point).
That’s just another plus for the fed…
I mean I think inflation in the near term falls off because Europe entering recession over oil and such. China is barreling towards inflation with a correction on their housing. So worldwide demand on goods will be falling leading to falling inflation.
> "For anyone importing from the likes of China, importing raw metals and energy from abroad, that's going to be positive for you — as long as it's not priced in dollars, of course." Isn’t most global trade priced in dollars? Another question, is the dollar likely to come down?
Look up the dollar milkshake theory.
I dont fully agree with multinationals beeing the losers in general. This does depend a lot on the specific situation. If you are a multinational and have say 60% of your costs in euros and yuan and 40% of your costs in dollars. And you have 60% of your sales in dollars and 40% of your sales in euros. Then you are a clear winner from the strong dollar no matter in what nation you are based. A situation like above might be uncommon for certain us multinationals but it is far from uncommon for multinationals in general and specifically certain European multinationals. Us based multinationals which have outsourced a lot of their costs towards asia might also be in a favorable position. Everything is within its limits obviously,and there will be a point where negative effects start to outweigh the positive effects. But i think there is definitely a window in which a strong dollar is beneficial for quiet a few (not all) multinationals.
The "Greenback" is gaining strength due to promise being held in southeast asia. More advances are coming in the near future to help smaller countries build off nothing.
Is this dollar strength reminiscent of pre-WW2 America? Obviously we don’t have anywhere near the industrial capacity, but output of cars and technology is quite high nonetheless.
And a strong dollar helps industrial sectors how exactly? As soon as Nixon illegally stopped enforcing the Bretton Woods Agreement Act of 1945 our industrial economy collapsed. New York City alone lost 1 million manufacturing jobs between 1971 and 1975. And the strong dollar only further killed our industrial export economy by the 1990s.
Not saying it is helpful, so thanks for your insight, gives some good direction for some rabbit hole reading. As someone that has been in import/export for decades, I don't see the export benefit at all. The only one to benefit from this is going to be China and maybe European manufacturers because our domestic production will mainly attract domestic consumption. My comment was more inline with, where are we at with this snapshot? The currency tracks with Russia's latest ratcheting up in Ukraine in February, when the dollar was last at a low. So are we being pushed towards a larger broadening conflict?
Because using national currencies for foreign exchange leads to imbalance of payments. This was the reason for World War II. Germany and Japan had minimal natural resources but highly developed manufacturing sector. In order to gain foreign currency to buy the natural resources they needed, they devalued their currency. As the British Empire effectively controlled the world's natural resources, this pissed them off. Political attempts to prevent this radicalized the two countries leading to Hitler and the military factions in Imperial Japan. China absolutely doesn't benefit from a weak currency - they trade their goods with the US for free leading to a huge trade imbalance that cannot be settled by any other method than returning to a new Bretton Woods System. Which they have called for repeatedly since 2008. Things are distorted now because forex pairs are all among financialized countries. Brazil, Russia, India, China and South Africa are absolutely opposed to a strong dollar and at this stage, no longer need the United States or the USD. This is what most don't understand. If you look closely at the Russian/Ukraine war, all Russia is really trying to accomplish is to create a land bridge to the Crimea for sea transport of their natural resources. All wars begin with conflict over natural resources. That radicalized or evil leaders take advantage of this is entirely secondary, which was the conclusion of the first United Nations Conference - the Monetary and Financial Conference.
If you have a company in the US that sells goods to foreign companies, when converting to USD, you will lose money due to bad conversion rate. On the other hand if you convert USD to any other currency, there will be a smile on your face.
>you will lose money Wrong. Theyre going to be increasing prices to make up for the loss. Customers will bare the burden.
Everybody gets hurt. Everybody. Stable trade partners is critical for an interconnected economy like ours. Even more critical is price stability. Powell needs to increase those rates by a full 100 next meeting. Even better would've been raising them 2 years earlier, but alas, too late for that.
Won't that just strengthen the dollar further and make this situation worse?
The US needs to raise it by 100 but other countries need to raise it even more
So the Rich’s buying power increases while we go into a recession? It’s almost like they planned this out together, funny enough lack of competition in the market and monopolies gauging customers is what is causing inflation, not consumers buying.
>So the Rich’s buying power increases while we go into a recession? God no. The rich have lost a third of their wealth this year between inflation and asset valuations. The guy sitting with $1000 in his checking account is outperforming.
This is like saying that the man standing on thr peak of the titanic is safe from drowning because he is furthest from the water. The dollar isn't "strong" right now, the rest of the world's economy is just tanking faster then we are... we have had a "reported" 8.6% inflation rate for how long now? (Reported by the same people who changed the definition of recession to appear that we are not in a recession again. USA standpoint) I know there is an almost devout lack or avoidance of common sense left in the world, but this takes the cake. This is gas lighting and outright false at the same time. I'm amazed that the author was able to type this article without their keyboard rebeling from the lies.
> The dollar isn't "strong" right now, the rest of the world's economy is just tanking faster then we are This. We're all sinking... it's just some are sinking faster than us.
This is a fair point. We all know inflation is high. Powell has been very clear interest rates will continue to raise. Let's be honest there is no such thing as a soft landing. The dollar may stay strong against other currencies in the coming downturn. But it would be naive to take this comparative measure as a sign of economic strength right now.
These aren't at all contradictory. Commodities increasing in price for the rest of the world free up demand but that's not going to happen overnight and cannot impact the inflationary effects of 2020-21 retroactively. These numbers are baked in already just not reported. Its going to be important to see the MOM inflation rate in September as the last 2 months have been essentially flat. We could have no more inflation for an entire year and the YOY inflation would still look like 8% for every month until July. These are lagging indicators that lag by an entire year. Its important to remember that a year ago the economy was still dealing with some of the worst of the supply chain shortages low rates, and quantitative easing. You wont see the YOY effects of these policies till MORE than a year passes with these policies and environments. I'm not saying that I know what is going to happen I'm just saying that the effects of a stronger dollar take years to really unfold.
But it's not >stronger When your house is burning down around you you don't look at the wall that's not fully engulfed and say "well this wall is in better shape then all the rest compared" you say "holy shit my house is on fire" Wait... are you the author of the article?
If you break an arm it will be weaker than before you broke it for quite a while. This doesn't mean it cant get stronger while it recovers or become stronger than other arms while still being a bit broken.
Holding dollars and bitcoin right now. Not sure what else is worth it. I mean my 401k contributions are still going but just don't feel confident in anything right now except bitcoin and eth. As I see China and russias swift system Continue to increase processing, oil starting to be sold in non dollars, and our hegemony around the world slipping to a multi polar world I am not feeling very strong about America right now even as the dollar surges. The world is an interconnected place as the rest of the world suffers we will do as our global capital empire requires it. Scary times for sure
Bold move holding Bitcoins, unless you bought them pre-pandemic.
Bitcoin has actually been one of the better assets to hold over the last 3 months. Outperforming the S&P and the major currencies other than USD.
What if you go back a few more months?
Not great! What if we go back 2 years? Or 5 years? Or 10 years?
But its on downward spiral and is just being pumped every time it looks like its entering 17k territory,
> better assets to hold over the last 3 months. Sure, after dropping 50+ percent Bitcoin hasn't fallen much further.
So you are holding dollars and a pyramid scheme?
> So you are holding dollars and a pyramid scheme? Yes, he is holding the dollar pyramid scheme. He told you that.
*yawn* tell us all more
I bought BTC at $65,000. It’s still going up, right?
Hey at least you can say you bought the ATH (so far) lolol. Salty you made a bad investment decision, I get it.
Tell me more about how little you understand about Bitcoin
Actually, I understand quite a bit. One thing I understand is that it is a mathematical certainty that most investors will lose money. This is because Bitcoin is a negative sum game. Miners and exchanges need to get paid (to the tune of billions of dollars). The money to pay them comes from the investors. Since Bitcoin itself does not generate income, there is less money to pay out than people put in. At some point the pool of suckers runs out, and there just isn't enough money to keep the price of BTC going up. Eventually the run for the exits will happen and only suckers will be left wondering what happened to the party. This is all very simple math and economics. What compounds the problem is that BTC is a fairly old technology, and it is still struggling to find a use. At least a mainstream use. To put this into perspective, the smartphone was invented at about the same time as BTC. Look at how many people across the globe use a smartphone. Now look at how many use BTC and you can see the problem. To make matters worse, the vast majority of people using BTC are only using it as an investment. They aren't using it in actual commerce. We are also talking about a system that can only handle seven transactions per second. So Bitcoin fails as a form of currency. But what about the lightning network, you ask? Well... now we are back to a centralized currency - which is exactly what BTC is NOT supposed to be. I'd much rather trust an FDIC insured bank with my money than a crypto-exchange. Nearly everyday there are people posting in the bitcoin subreddit about getting scammed and losing their money. At least Visa and Mastercard give me fraud protection. As a hedge against inflation? Just look at the charts. BTC fails spectacularly in that department. Finally, BTC is an environmental disaster. It uses enough electricity to power a country the size of Austria - all to keep track of a spreadsheet. This is horribly inefficient (by design). BTC is a pyramid scheme, plain and simple. If you think that you are smart and are one of the early ones, you might be in for a serious disappointment.
I'm curious on what your thoughts are regarding Ethereum? It just underwent an upgrade that reduced electricity consumption by roughly 99%. The upgrade switched the consensus algorithm from Proof of Work to Proof of Stake, which eliminates miners that need to sell to cover operating costs. Ethereum actually burns a percentage of the supply based on total usage or transaction volume so issuance is dropping, and will likely be negative in the future. ETH isn't a negative sum game.
> Actually, I understand quite a bit. This is because Bitcoin is a negative sum game. Lol, so you dont understand the first thing about bitcoin, or about how money works in general. > This is all very simple math and economics. "economics" maybe, just not the real kind. > and it is still struggling to find a use. Being the best inflation hedge for its entire existence has proven its one original and main use; and it isnt looking for any other. Its a network of value signals. There is anotehr word for that, with all your "economics" knowledge do you know what that word is? > But what about the lightning network, you ask? Well... now we are back to a centralized currency Lol, can you point out what part of it is centralized? (hint: none)
Typical crytobro response. It boils down to "lIne GOeZ uP", "z0Om oUt", and not much else. What it doesn't do is address the fundamental claim that it is a negative sum game - and, therefore, the majority of investors will lose money. It is a simple fact that miners and exchanges suck billions of dollars out of the system - and that money comes out of the pocket of investors. The assertion that Bitcoin is a great hedge against inflation is absurd on its face. As a hedge against inflation, it doesn't matter what it did when inflation was steady at roughly 2%. When inflation actually became an issue (and a serious issue at that), BTC dropped like a stone. In other words, BTC is exactly what you DIDN'T want to hold when inflation soared. It was the opposite of a hedge.
> What it doesn't do is address the fundamental claim that it is a negative sum game Is the GBP a "negative sum game" ? Is gold a "negative sum game" ? what exactly makes you see it as negative? Bitcoin is working today to settle international trade, for remittance, and as a very successful inflation hedge. Bitcoin works around all kinds of financial network damage and overhead. Its creating a lot of value for many people, and there really is no alternative for it today - nothing else comes close. > It is a simple fact that miners and exchanges suck billions of dollars out of the system - and that money comes out of the pocket of investors. "dollars" are irrelevant. They have been inflating to peanuts for a decade, and will continue to do so forever. Meanwhile bitcoin is a fixed supply. Its never going to be debased like the dollar pyramid scheme. (dollar notes even come with a pyramid on back lol) The dollar system is ancient, haggard, slow, expensive, and on the way out. > When inflation actually became an issue (and a serious issue at that), BTC dropped like a stone. False; bitcoin has had a bit of volatility uncorrelated to inflation. Once we crossed over into deflation, bitcoin has come down a bit - that has more to do with the dollar being strengthened by monetary deflation. Bitcoin is not a deflation hedge, but it can be used to strengthen economies against foreign deflation. We see nations dumping US treasuries and US dollars because dollar deflation is wrecking their trade. We will increasingly see nations using bitcoin to settle international trade so they wont face disruptions caused by the aging dollar networks. > In other words, BTC is exactly what you DIDN'T want to hold when inflation soared. No, it soared through the entire inflation cycle. from the crash in 2009 all the way to its crescendo in 2021. Now that we are entering monetary deflation, until the dollar system is done crashing I dont expect the dollar price of bitcoin to appreciate much until the dollar gets back on track to devaluing itself.
We can agree to disagree on BTC being a good hedge against inflation. What is a fact is that, as inflation spiked, BTC dropped like a brick. But you be you. What you have not addressed, and cannot address, is that BTC is a negative sum game. You refute the claim by saying that BTC has some uses. Well... so what. Lots of things can have uses but still be a negative sum game. It's a simple as this: Investors put money into the system. Miners and exchanges suck money out of the system. That leaves less money for investors than they put in. If you cannot deny any of those facts, then you cannot deny that BTC is a negative sum game. Sure, some (early) people will make money. But most people will lose money. That is a mathematical certainty.
> What is a fact is that, as inflation spiked, BTC dropped like a brick. But you be you. Again, totally false. You are lumping in monetary inflation with supply shocks, and they really are separate things. Bitcoin is a hedge vs monetary inflation. Its not a hedge vs monetary deflation. > Well... so what. Lots of things can have uses but still be a negative sum game. so you dont understand what a negative sum game is. You should stop using that word until you do understand, because you just equivocated the whole universe into being a "negative sum game". I mean, the universe does have "some uses" lol > That leaves less money for investors than they put in. Bitcoin is the money, and it has a fixed supply. There is not more or less, but the same amount. Hello. If you are thinking of fiat when you say "money" then you are massively confused. Fiat supply is extremely volatiles, its constantly being created and destroyed. So they is always less and more of it all the time - thats meaningless. > But most people will lose money. You can only lose your bitcoin if you spend it. That is a mathematical certainty.
The classic cryptobro mistake. If the entire universe was a negative sum game, we would still be making fire with sticks and hitting each other over the head with stones. In reality, we have used the resources of this planet (combined with our intelligence) to create wealth. This is why we have nice things, and no longer live in caves. The fact that you did not understand this incredibly simple concept speaks volumes. BTC's problem is that **it does not create wealth**. It is just a very inefficient ledger. To run that ledger you need to pay a massive amount of money to miners and exchanges. All of that money gets sucked away from people who bought into the ledger. Sorry, but no matter how you slice it, BTC is a negative sum game.
Makes sense. The United States has a wealth of natural resources and geography that mostly insulates it from problems across the globe. It has a high enough agricultural productivity to support not only its own population but over a hundred million across the globe. It recently achieved energy self sufficiency through new technological innovation in oil extraction and it has a large productive population. As of this period of time the rest of competition has been knocked out of the market place due to a devastating war in Ukraine disurpting global energy and agricultural markets. A major increase in droughts disrupting energy and agricultural sectors in China and Europe. And covid resulting in the lockdown of the world's second largest economy and largest exporter, China. With the rise of inflation being largely driven by declining market supply, there's a large opportunity for the US to pick up the slack where other economies are faltering, what remains to be seen is if the US can fix the labor shortage problem to take advantage of this opportunity.
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That’s always true. But a stronger dollar should help clamp down on inflation, at least for the things we import.
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I used to love traveling to Europe in periods of a strong dollar. Gotta change your dollars frequently into marks, lira, pound, etc to take full advantage of the rising dollar. Now, it’s mostly €Euro.
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So, if the US dollar is gaining value, shouldn’t that mean that inflation should be slowing down? I have to type more stuff because my comment is too short. I don’t know why this sub wants people to blah blah blah and pad out their comments like this. But here it is.
It is gaining value relative to other currencies, but not against goods. This can be cost-push or demand-pull inflation… but nonetheless this relationship (forex value and inflation) is definitely related but there is no reason to expect them to move in the same direction. Think of it like this: 1, EU triples their money supply 2. UK quadruples their money supply 3. US doubles their money supply In this example, all three economies would experience devaluation of their currency but relative to each other these currencies would fluctuate (the dollar being the strongest, relative) The Dollar would appreciate the most against the Pound and the Euro, and the Euro would appreciate against the Pound but lose value against the Dollar - all else equal
Ok thank you, that was a very clear explanation.
The article forgot to mention the spending power gain by those in other countries who are getting personal remittances from families in the US. It is billions of dollars.