Mega-Bailout, Dollar Flood, So How Are They Out Of Dollars Yet Again?

Who would’ve ever guessed? Jay Powell flooded the world with dollars, “overseas” swaps and all, but more and more you get the impression he doesn’t really know what he’s doing. The Fed Chairman, of course, is never alone when it comes to these things. He’s got plenty of company.

Recall, for a moment, how the IMF in June 2018 “rescued” Argentina. Big, big deal. Biggest bailout in IMF history. Previously, the country had binged – hard – in Eurobonds at a time when globally synchronized growth had been somehow taken seriously because of people like Jay Powell (specifically his immediate predecessor).

The country went from a 2.4x oversubscribed Eurobond at historically low yields (January 2018) to the biggest IMF action ever (June 2018) in the space of five months. Five months.

What had changed in that small amount of time? What monumental shift could have flipped such a switch? Trade wars between the US and China, right?

It’s easy to believe that it was something specific to Argentina, but it’s obvious this was never the case.

April 2018 is when the dollar surged higher (despite the petroyuan’s heavily-promoted introduction). In everything that has happened in the two and a half years since, we still write about this one little country in South America because it is the embodiment of all that’s wrong with conventional dollar theories. Or conventional theories about the dollar.

Or conventions thinking backward about what is this dollar and its true role as a reserve currency regime.

So, IMF rescue a couple years ago plus Jay Powell’s global dollar flood throughout the middle part of this year equals…not what it was supposed to. Instead this (thanks T. Tateo):

Like thousands of companies, Guerrini Neumáticos is unable to import goods because the country’s central bank is running out of dollars to conduct basic foreign exchange transactions.

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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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