The dollar is seen as strong right now because countries have a shortage of dollars because they have fewer dollars than expected because of reduced trade.
Oil is cheap. Zero investment going into oil development. When the economy opens up exploration and production companies are going to be bankrupt which will prevent the supply from keeping up with demand. Oil prices will spike.
Production is low. Meat packing plants are closing. Factories are shut. But demand for many of those goods is good. This will drive prices up. There is also this long term push to bring manufacturing back to the US which will cause disruption and further higher prices as the cost of a secure supply chain.
Other countries no longer have excess dollars to spend on US treasuries because US consumption is dropped. Moving supply chains back to the use will also reduce the trade deficit giving other countries fewer dollars to buy our treasuries.
Also, the boomers are retiring. This means they are liquidating their savings (social security and pension funds) which hold lots of treasuries.
Because the US government can’t cut expenditures and can’t raise tax revenues it’s going to keep needing to borrow money. But because fewer countries have excess dollars they aren’t going to buy the debt at the time we need it most. The only other buyer is the Fed Reserve.
It is now clear that the US is monetizing debt and has no intention of paying it off. At some point the value of the dollar will devalue faster than the return on the debt. The realization by the sovereign and institutional holders of the debt will cause a tsunami of Treasuries being sold. This will push the market interest rates up unless the Fed buys them all.
The returns of the treasury bills will be spent buying hard assets like land, commodities and infrastructure projects. The prices of all things will go up.
This is complicated because all major currencies are in a similar position but it's worse for the US because so many people hold our debt and reserves of cash that could be quickly sold. Every country that stops trading oil in the dollar like Russia has will free up billions of dollars that can be spent on hard assets using dollars. I’m a contrarian. I think being the reserve currency is actually a liability when hyper-invation starts.
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