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Why is the USD getting stronger? Shouldnt the inflation in the US due to loose monetary policy make the USD weaker internationally?
by beebmam 4y ago
Why is the USD getting stronger? Shouldnt the inflation in the US due to loose monetary policy make the USD weaker internationally?
- decremental 4y agoIt's not. The Euro is getting weaker at a rate faster than the US dollar.
- frozencell 4y agoDue to US-EU lobbies?
- frozencell 4y agoWhy does the EU punishes France’s nuclear electricity?
- mabbo 4y agoThe Euro is getting weaker, faster. There's a war with Russia. And apparently some monetary policy changes are moving too slowly.
- RC_ITR 4y agoWhich is a very strong indicator that current inflation is much more driven by real economy factors than by monetary policy (or at least the situation is more complex than the “money printer go Brrr” crowd wants you to believe).
- reedjosh 4y agoIt's really just that “money printer go Brrr” globally. All of the world's central banks are printing like mad. Both the EU and Japan both have negative interest rates atm.
- MikePlacid 4y agoRussia, while at war, is doing not that bad, surprisingly: https://www.xe.com/currencyconverter/convert/?Amount=1&From=RUB&To=USD https://www.xe.com/currencyconverter/convert/?Amount=1&From=...
- boc 4y agoThat's a very misleading metric since it doesn't reflect the real-life experience of most Russians looking to exchange money. It's just a show metric the government is maintaining.
- RC_ITR 4y agoBut then why is the most printed currency the one getting strongest fastest?
- aluminaient 4y agoGetting weaker more slowly*
- RC_ITR 4y agoYeah, which in a global energy crisis, is about the best you can hope for.
- mrep 4y agoThe euro zone and the US are neck and neck actually overall [0, 1] and if you measure it relative their gdp which you should, the eurozone is actually at 61% of gdp whereas the US is at 35% [2]. Japan is the real money printer though at a whopping 130% of gdp! [0]: https://fred.stlouisfed.org/series/ECBASSETSW https://fred.stlouisfed.org/series/ECBASSETSW [1]: https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... [2]: https://blocnotesdeleco.banque-france.fr/en/blog-entry/understanding-expansion-central-banks-balance-sheets https://blocnotesdeleco.banque-france.fr/en/blog-entry/under...
- nabla9 4y agoYou are right. Something like 60-70% of inflation is energy everywhere. You can look components of inflation in both regions and see exactly how much is hydrocarbons.
- echelon 4y agoThe US has energy, food, and most of the business inputs it needs. The Eurozone is facing war and an energy insufficiently.
- dhruval 4y agoEurope has record inflation as well. The ECB is lagging behind US federal reserve in tightening monetary policy. (They are just about to implement their first rate hike in 11 years)
- x3sphere 4y agoInflation is just as high in the EU is it not? It's probably the flight to safety effect. Monetary policy is shifting, Fed has said they will keep tightening until inflation is back to 2%. For whatever reason a lot of people keep betting on a pivot. I don't see this happening, even if the end result is a recession (may already be in one). Inflation continuing to rise is ultimately worse than another recession if the Fed pivots.
- lamp987 4y agoEU decided to commit economical suicide with sanctions. They just bet that Russia will die first.
- nikanj 4y agoThe US has the option of sitting this one out. The EU have to deal with Russia
- ShivShankaran 4y agoIran and Venezuela are not dead yet. Russians have a higher degree of tolerating poverty than Europeans. EU and Russia are playing .... the Russian Roulette
- dkjaudyeqooe 4y agoInflation is everywhere, so less of a factor. Instead: US has a higher interest rates. US has a stronger economy (relatively). US Dollar is where people go in times of trouble. US central bank is turning off QE ("money printing") US central bank is planning on reversing QE ("money destruction")
- medo-bear 4y agoUS tells EU to jump EU asks how high
- ShivShankaran 4y ago
- hef19898 4y agoSimply not true. Ask George W. how much EU support he got for the war on terror. Also, the US, while syarting a lot of wars in last decades, didn't start or instigate the one in Ukraine. That was Outin trying to pull a NATO / George W. war on terror thing that didn't work out as planned.
- EB-Barrington 4y agoRussia invaded Ukraine. Before that, there was no war. This is an exceedingly simple concept, and a fact. Russia instigated the war.
- medo-bear 4y agoinstigated or not it is clearly being played to us advantage: strangle russia + make eu pay for much more expensive us gas. whats perhaps suspicious is all the pre war efforts the us made to stop nord stream 2
- EB-Barrington 4y agoCurrent events tell us the US was right. Russia instigated the war, there is no "or not".
- Someone1234 4y agoIt is a race down, and the EU is "winning." The EU was/is too heavily dependent on Russian oil and natural gas whereas the US has better isolation due to its domestic fuel production. Both regions need to improve renewables for national security reasons, and work on winterizing and migration to residential/commercial heat-pump technology to both reduce usage but also move to electrical-based heating/cooling which can be sourced from multiple vectors (renewables, gas, nuclear, et al.). People frame renewables around global climate change, which while true, isn't the elephant in the room. The elephant is national security and stability, and renewables are a key element.
- pydry 4y agoLong term we need more renewables. Short term we need a negotiated end to this war. There is going to be economic carnage if we keep turning the heat up.
- throw_nbvc1234 4y agoThe West/NATO are reluctant to force Ukraine to make a settlement. They've been very clear that it's up to the Ukrainians. That could change closer to winter and it seems Zelensky is aware of that. https://www.washingtonpost.com/politics/2022/06/28/zelensky-maybe-tells-biden-he-wants-war-over-by-winter/ https://www.washingtonpost.com/politics/2022/06/28/zelensky-...
- deleted 4y ago[deleted]
- beebmam 4y agoWhy should anyone settle with a robber? We should be destroying the lives of criminals like this, not settling
- HWR_14 4y agoThe better example is that Russia was robbing a bank and now has hostages (I think I've seen many movies about it). Why negotiate even though they're wrong? Because they can shoot a hostage (nuke something). Their nukes don't mean that you let them do whatever they want. But it means that you have to take limited actions that keep the warfare conventional. And sometimes that means settling with them. Heck, finding something that Putin can claim is a victory is probably important if you want the war to end. It doesn't matter if it's real, and it may not matter if he thinks it's something he won. It certainly matters that he can tell the Russian people that the cost they bore to "denazify" Ukraine worked. Otherwise, he failed and that way lies bad consequences for dictators.
- CamperBob2 4y agoYou don't have to outrun the bear, you just have to outrun the guy next to you.
- cheerioty 4y agoName checks out.
- narrator 4y agoUSD can be used to buy Oil and LNG. That's most of it. Euro buys oil in USD and then the USD goes into treasuries. It's called Petrodollar Recycling[1]. [1] https://en.wikipedia.org/wiki/Petrodollar_recycling https://en.wikipedia.org/wiki/Petrodollar_recycling
- SkyMarshal 4y agoUS interest rates are rising so US treasuries are getting cheaper to buy, thus providing a higher payoff if held to expiration. ECB hasn't started raising EUR rates yet. That combined with the economic security of US relative to Europe is probably attracting safe haven-seeking capital.
- adam_arthur 4y agoCurrencies can lose value in an absolute sense while gaining value in a relative sense. USD per unit of goods is a different metric from USD per EUR Both USD and EUR are losing value relative to real goods, just at different rates
- bubbleRefuge 4y agoHow about USD in private sector circulation becoming scarcer due to higher prices paid for same output and lower USD federal deficit spending being a deflationary force.
- Mikeb85 4y agoThe EU also had loose monetary policy resulting in inflation. USD is getting stronger because of the American oil industry. Demand for exports is always a major factor (probably the biggest factor actually) in exchange rates.
- howmayiannoyyou 4y agoWhy: - Germany facing record deficit spending to offset energy shortages due to Ukraine war. - Massive US-denominated debt in Europe, requiring USD to service and/or payoff at a time when the US has raised interest rates and decreases liquidity. This is a huge reversion of a bubble that has enlarged for over a decade. - Greatly decreased USD revenue from exports to US due to inflation, adjusting EURO downward in a somewhat autonomous rebalancing (meaning not necessarily central bank led). - Inflation over imports of food, energy & other goods settled in dollars. - Fissures in the EU over German and Hungarian reluctance to participate meaningfully in defense of Ukraine as a proxy for defense of countries like Poland and Lithuania. - Risk premiums across the board.
- atwood22 4y agoBasically, people are expecting the Fed to have a stronger response to inflation compared to the ECB. The Fed is expected to have a stronger response to inflation than most of the world, which is why the U.S. dollar is so strong against other currencies as well.
- MR4D 4y agoThe US is raising interest rates faster than others, all other things being equal - which they aren't but for simplicity, it's close enough). That is effectively what is driving up the price of the dollar - more people are moving their money over to take advantage of rates that they expect will pay more than other currencies. Think of it like this - Would you move your money to a bank paying 2% interest versus a bank paying 0% interest? Not everyone would, but many would.
- WalterBright 4y ago> Shouldnt the inflation in the US due to loose monetary policy make the USD weaker internationally? The EU is inflating their currency more.
- partiallypro 4y agoThe US Dollar is up against almost every major currency, uncluding the British Pound. It's up against the Franc (though way off of ath's), the Yen, the Krone, etc. It's a safety trade, the European economy is much more fragile than the US's. China and Russia are testing the waters on how far they can push things, so the dollar gets bought up. If Russia cuts off Nord Stream it will be quite disastrous for most every country in the region sans Norway because it's essentially a petrostate. People seem to think that if Ukraine collapses and Russia just takes it that the EU/US will just be able to back off, but that's not in the cards.
- Rury 4y agoSince March, US monetary policy has been tightening. Amount of USD in existence, is now also shrinking. This is what is making the USD stronger.