The strength of the US dollar can indeed hold substantial implications for the global economy and markets. My clients are fully aware of my longstanding position on the US dollar. The issue with narratives predicting a dollar crash, which are not new, ultimately comes down to practical considerations.
The entire global system operates on dollar collateral chains. If the dollar were to collapse and replaced with something else, the entire system would not just collapse but also lose all significance. While I may be hopelessly biased and have concerns about the greenback for some reasons, without viable alternatives or the capacity to implement any superior ideas, what realistic options do I have?
The majority of individuals and media outlets promoting narratives about the dollar crashing are often unaware of the extent to which they have been influenced by specific propaganda, especially in the era of social media.
This article from Bloomberg will surely catch the attention of those investors whose portfolios are calculated in dollars. Ouch! I could go on and on.
Here is a section:
In the face of calls around the world to diversify out of the dollar in recent years, the US has nabbed almost one-third of all the investment that flowed across borders since Covid struck.
An IMF analysis sent by request to Bloomberg News shows that the share of global flows has climbed not fallen since a shortage of dollars in 2020 spooked global investors and the 2022 freezing of Russian assets stoked questions about respect for free movement of capital.
The pre-pandemic US average share was just 18%, according to the IMF. For all the angst over the dollar’s dominance, a run-up in US interest rates to the highest levels in decades proved a major draw for overseas investors.
The US has also pulled in a fresh wave of foreign direct investment (FDI) thanks to billions of dollars worth of incentives under President Joe Biden’s initiatives to spur renewable energy and semiconductor production.
The trend marks a major shift from the pre-pandemic days when capital poured into emerging markets, including a rapidly growing China. The big US geopolitical rival has seen its share of gross global inflows more than halve since the pandemic hit.