THE U.S. DOLLAR IS SURGING. WHY? AND WILL IT CONTINUE?

David Fields
State of Utah, Housing & Community Development

So, what is the Fed’s deal? Has Jerome Powell fallen prey to inflationary paranoia and hysteria for all the wrong reasons? Or is a “strong’ dollar a manifestation of a particular response to a policy choice that is more calculated and direct? By facilitating aggressive monetary austerity, the Federal Reserve is ensuring the US dollar is a safety asset to insulate the global rentier from cost-push-markup inflationary unpredictability.

The US dollar is surging to new heights. For instance, the US Dollar Index, which values the greenback against a basket of currencies, has advanced considerably. One of the burning questions is whether this will last? For now, I think, yes, it will, simply because there is no alternative for global trade invoicing and financial accounting. Aggressive monetary austerity policy from the Federal Reserve, a project aimed at using unemployment to tame cost-push-markup inflation, is pushing rival currencies lower, particularly in emerging market economies that suffer from balance of payments constraints, as investors from around the globe rush to purchase US Treasuries for security in the face of world-systemic economic uncertainty.