4 ms·

I find it ridiculous that the strong USD, which is the main cause of pending global financial crisis, was directly brought on by Federal Reserve’s head in the s

by lvl102 4y ago

I find it ridiculous that the strong USD, which is the main cause of pending global financial crisis, was directly brought on by Federal Reserve’s head in the sand moments: (1) not raising rates or even stopping QE prematurely when inflation was flashing bright neon red, then (2) ignoring all the data points to overcompensate for its gross negligence in (1). UK is not isolated here. We are on the cusp of an avalanche across developing countries and EU.

asdfasgasdgasdg 4y ago
As far as I understand, weakening the USD for the benefit of parties foreign is not part of the federal reserve's mandate. Maybe it should be but it isn't. I'm also not sure how continuing with inflationary policy could strengthen the USD. Surely any delay in raising rates should weaken it relatively speaking? Also, it is natural for the USD to appreciate given the energy crisis and knock on effects from that, isn't it?
- djbusby 4y ago
  Why natural? Is it some effect of the "petro-dollar" thing?
  - theplumber 4y ago
    U.S sells a lot of oil and gas and as it happens Europe needs both. A lot of capital is fleeing from Europe and other risky markets(China) to safe havens( the U.S). All this in addition to the fed rate cuts.
    - djbusby 4y ago
      Did you mean rate hikes? Isn't US Fed raising?
      - theplumber 4y ago
        Rate hikes indeed
- lvl102 4y ago
  The problem is really that they are doing it extremely fast while ignoring the very financial plumbing they made everyone around the world rely on for two decades. It’s quite shortsighted to keep USD at extremes to soften inflationary pressures in the US while letting the RoW and developing countries burn. It’s 2022 and everything is connected. There’s no such thing as a decoupled economy.
  - landemva 4y ago
    Biden forked Russia out of Swift system, so the world is splitting (Russia, China, Iran).
  - collegeburner 4y ago
    so you are saying we should sit through 15, 20% inflation for the sake of other countries? that's not the fed's mandate and you will never, ever get domestic support for that. nor should you tbh, we should not suffer for the sake of everyone else. we don't want the dollar quite this strong but it's better than the alterantive. regardless it's not all our choice. people will keep fleeing to the dollar for stability and that will strengthen it relative to other currencies. believe me this is not all fed policy or even mostly fed policy, we still have a lot of inflation so domestic winds aren't making it that strong. this is a "relative basis" thing. besides, what do you think the RoW impact would be if there was no safe currency to flee to? and lastly petrodollar go brrrrr, energy crunch means we will have a strong dollar like it or not.
snake_doc 4y ago
Are you positing that had the Fed raised rates earlier that the dollar wouldn’t have strengthened? The US dollar strengthens when (1) the world goes into downturn, and/or (2) when US interest rates rise. In what scenario would the US dollar not have strengthened? It was inevitable regardless of what the Fed does because of the greenback’s dominance in world reserves and trade. It’s a currency of last resort in times of busts and booms. The dollar smiles.
- lvl102 4y ago
  I am saying that if they cut the bullsh_t back in March 2021, when all the excesses from crypto, meme stocks and SPACs were blatant, we would not be here today. They made a very public choice to let that play out. Heck, even China was hitting the breaks at that point. A 200-250 hike cycle would have more than sufficed. This is gross negligence. The worst monetary policy decision that they are now compounding.
  - snake_doc 4y ago
    I’m not sure what world you were living through in March 2021, but no one was cutting back fiscally at that point. Had you forgotten the US then passed ARP in 3/2021? The Fed’s only instruments are interest rate and signaling, QE is controlling long tail of the curve. You wanted the Fed to raise rates at the same time when fiscal policy added another $2T in spending? The more logical argument is perhaps the US shouldn’t have passed ARP and poured gas on the fire.

by lvl102 4y ago

asdfasgasdgasdg 4y ago

As far as I understand, weakening the USD for the benefit of parties foreign is not part of the federal reserve's mandate. Maybe it should be but it isn't. I'm also not sure how continuing with inflationary policy could strengthen the USD. Surely any delay in raising rates should weaken it relatively speaking? Also, it is natural for the USD to appreciate given the energy crisis and knock on effects from that, isn't it?

djbusby 4y ago
Why natural? Is it some effect of the "petro-dollar" thing?
- theplumber 4y ago
  U.S sells a lot of oil and gas and as it happens Europe needs both. A lot of capital is fleeing from Europe and other risky markets(China) to safe havens( the U.S). All this in addition to the fed rate cuts.
  - djbusby 4y ago
    Did you mean rate hikes? Isn't US Fed raising?
    - theplumber 4y ago
      Rate hikes indeed
lvl102 4y ago
The problem is really that they are doing it extremely fast while ignoring the very financial plumbing they made everyone around the world rely on for two decades. It’s quite shortsighted to keep USD at extremes to soften inflationary pressures in the US while letting the RoW and developing countries burn. It’s 2022 and everything is connected. There’s no such thing as a decoupled economy.
- landemva 4y ago
  Biden forked Russia out of Swift system, so the world is splitting (Russia, China, Iran).
- collegeburner 4y ago
  so you are saying we should sit through 15, 20% inflation for the sake of other countries? that's not the fed's mandate and you will never, ever get domestic support for that. nor should you tbh, we should not suffer for the sake of everyone else. we don't want the dollar quite this strong but it's better than the alterantive. regardless it's not all our choice. people will keep fleeing to the dollar for stability and that will strengthen it relative to other currencies. believe me this is not all fed policy or even mostly fed policy, we still have a lot of inflation so domestic winds aren't making it that strong. this is a "relative basis" thing. besides, what do you think the RoW impact would be if there was no safe currency to flee to? and lastly petrodollar go brrrrr, energy crunch means we will have a strong dollar like it or not.

snake_doc 4y ago

Are you positing that had the Fed raised rates earlier that the dollar wouldn’t have strengthened? The US dollar strengthens when (1) the world goes into downturn, and/or (2) when US interest rates rise. In what scenario would the US dollar not have strengthened? It was inevitable regardless of what the Fed does because of the greenback’s dominance in world reserves and trade. It’s a currency of last resort in times of busts and booms. The dollar smiles.

lvl102 4y ago
I am saying that if they cut the bullsh_t back in March 2021, when all the excesses from crypto, meme stocks and SPACs were blatant, we would not be here today. They made a very public choice to let that play out. Heck, even China was hitting the breaks at that point. A 200-250 hike cycle would have more than sufficed. This is gross negligence. The worst monetary policy decision that they are now compounding.
- snake_doc 4y ago
  I’m not sure what world you were living through in March 2021, but no one was cutting back fiscally at that point. Had you forgotten the US then passed ARP in 3/2021? The Fed’s only instruments are interest rate and signaling, QE is controlling long tail of the curve. You wanted the Fed to raise rates at the same time when fiscal policy added another $2T in spending? The more logical argument is perhaps the US shouldn’t have passed ARP and poured gas on the fire.