There’s Two Sides To Being (Dollar) Sheltered

I wrote yesterday, twice, that it’s the eurodollar’s world, we are all just trying to live in it. This is not a uniformly recognized fact of life, though. People in the US are sheltered. We tend to overlook the dollar because for us it’s just the dollar. The very idea of a global reserve currency is truly foreign here.

Because of that, I tend to interact much more with people overseas. Any harmful effects of the eurodollar system’s decay strikes them first and often hardest. As Euro$ #3 began to really turn serious in June 2015, I wrote:

The latest TIC data through April 2015 confirms that central banks have not just mobilized massive reserves, they have done so at an unprecedented rate consistently for the past six months tracing back to the aftermath of October 15. Starting December, “official” sources have sold (mobilized) a net $77 billion in dollar-denominated assets; there is simply nothing on that scale in the historical accounts, even the worst parts of 2008.

The result was currency chaos from December 2014 forward. Since that tumult was measured against the dollar, Americans hardly noticed. The media dubbed it, with Janet Yellen’s approval, “overseas turmoil.” It was only in August 2015 that people here finally got the feeling something was up. And it wasn’t CNY’s plunge early in that month.

No, it was when Wall Street crashed two weeks thereafter doubts about the overheating, booming US economy were taken seriously. Those things were connected, though hardly anyone knew it.

Those outside the US could see it better because there was no getting around it. When your local central bank is forced to spring into action, chances are you’ve already noticed some bad stuff showing up in your own economy. Even if you don’t know that you central bankers are “selling UST’s” on your behalf, you can pretty easily connect the currency chaos to all that’s starting to go wrong in the real economy.

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Disclosure: This material has been distributed for informational purposes only. It is the opinion of the author and should not be considered as investment advice or a recommendation of any ...

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