- The loss of US policy independence in accordance with the impossible trinity
- This poses threats to globalization in the context of US losing independence.
- US (excess consumption no saving) is polar opposite of Japan (lower consumption high savings).
The current new-found affinity for US dollar is actually repulsion to EM markets rather than affinity to US dollar. This money will go to newly spiced up US exporters. Exporters loose their competitiveness as it is derived from US dollar weakness. People loose money. It doesn’t matter in which currency you loose it – its lost. Loosing it in dollars makes it little better for the rest of us because there are just too many dollars sitting in vaults these days.
Welcome to the down-cycles.