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I don't get it. The dollar is supposed to be inflating, so it should take more dollars to buy things. But it takes fewer dollars to buy euros and pounds and s

• djbebs 4y ago
  Those other things are inflating even faster...
• jliptzin 4y ago
  They are inflating too
• kmeisthax 4y ago
  The Fed has also been raising interest rates, and doing so faster than other countries, which makes the US dollar more valuable than those other currencies. But both currencies are still inflating because COVID and the Ukraine war have managed to shut down a lot of productive capacity in the economy. People are too rich to do without the goods being shorted, so instead prices go up.
• mym1990 4y ago
  The price of goods and services is inflating but currencies/stocks/bonds are not factored into inflation metrics. If you were to take the current environment for assets, you could say we are in a deflationary period for those specific things.
• dageshi 4y ago
  Interest rates and interest rate expectations are the most powerful drivers in the currency markets.
• RC_ITR 4y ago
  Inflation is the supply/demand relationship between a given currency and the things you can buy with said currency (financial assets like stocks are weird because they are valued based on future cash flows which causes some weird recursive effects) The US is experiencing inflation because, across a number of categories, there is not enough supply of goods and services to match demand. This is due to things like “we built hotels for normal business travelers but now we have digital nomads” and “we are not really utilizing public transit anymore so more people want cars” etc. Other countries are facing the same problems but worse (partly due to the war in Ukraine, among other idiosyncrasies) so the dollar becomes stronger relative to those currencies. Keep in mind, the value of a currency in forex is usually “I need to buy a Euro because I want to buy something from someone who only accepts Euro.” So a factory shutting down in Germany (in a round about way) makes the Euro less valuable.
• hristov 4y ago
  The answer is simple -- it is just a flight to safety. And the dollar is the safest place to hold assets at this point. The inflation is not the biggest issue. If inflation was the biggest issue, everyone would be holding the stocks of companies that make the things that are inflating the most. But those stocks are going down with everything else. The problem is the damage Jerome Powell is intentionally doing to the economy in the name of fighting inflation.
• reducesuffering 4y ago
  You have 100 magic dollars in circulation and 10 basket of goods; 10 per basket of goods. Then, there only 8 basket of goods. No change in circulation. Still, now 125 magic dollars per basket of goods. Goods production is down.
• lottin 4y ago
  > The dollar is supposed to be inflating, so it should take more dollars to buy things. It turns out the bitcoin theory of inflation is wrong.
• AnimalMuppet 4y ago
  The US dollar is losing an ugly contest. It's ugly, but it's not as ugly as all the other contenders.