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#monetarypolicy

7 posts7 participants1 post today
Public
Miguel Afonso Caetano

"Over time, both the exorbitant privilege and the convenience yield have shown signs of erosion, mirroring the relative decline of the US in the global economy. In the current landscape, the euro is the only credible alternative to the dollar. A growing international role for the euro could allow the Eurozone to capture a portion of the exorbitant privilege and convenience yield, thereby lowering the cost of capital for European firms and governments.

However, greater internationalisation of the euro requires a more resilient euro-area financial system. In the future, the Federal Reserve’s “dollar swap lines” that enable central banks to borrow dollars in exchange for their own currencies may not be guaranteed in times of stress. Thus the euro area must be better prepared.

In the short run, this may mean precautionary accumulation of dollar reserves, enhanced co-ordination among central banks, and a concerted effort to reduce the banking system’s exposure to dollar liquidity risk. The functioning of foreign exchange derivative markets should also be scrutinised to increase resilience during systemic shocks. Importantly, payment systems in the euro area should be fully independent of the dollar."

ft.com/content/5bc02699-3eda-4

Financial Times · How Europe should respond to the erosion of the dollar’s statusBy Hélène Rey
#USA#Trump#Tariffs
Public
Miguel Afonso Caetano

"The dollar is a global currency because American policies and institutions have historically been more reliable than those of most other countries. If MAGA economists think this is a problem, then their boss has a ready-made solution. By imposing tariffs that violate international treaties, speculating about the invasion of allies like Canada and Denmark (to take over Greenland), ignoring court rulings, and threatening to seek a constitutionally prohibited third term, Trump is making the US more like weak-currency, high-inflation countries.

The world’s reaction to Trump’s “Liberation Day” tariffs was unambiguous: the dollar lost nearly 7% of its value against the euro while the yield on ten-year Treasuries rose by almost half a percentage point. The currencies of emerging and developing countries also plunged, because higher tariffs and a slowing world economy dim their growth prospects.

It is not easy to devise a policy that hurts almost everyone, but MAGA economists have managed this feat. If the global dollar goes down the drain as a result, it will have many mourners."

project-syndicate.org/commenta

Project Syndicate · Who Benefits From a Global Dollar? | by Andrés Velasco - Project SyndicateAndrés Velasco shows why almost everyone does, not least the United States, even as the Trump administration jeopardizes it.
#USA#Trump#Tariffs
Public
Miguel Afonso Caetano

"More broadly, what I am saying is that, based on many of my indicators, it appears that:

1) we are on the brink of the monetary order, the domestic political and the international world orders breaking down due to unsustainable, bad fundamentals that can be easily seen and measured,

2) the progression of events leading to these increasing disorders is similar to those that have progressed many times throughout history, so this one looks like a contemporary version of the old story of how monetary, domestic political and social, and international geopolitical orders change,

3) there is a growing risk that the United States, imposing these challenges to deal with, will increasingly be bypassed by a world of countries that will adapt to these separations from the United States and create new synapses that grow around it, and

4) if these circumstances are managed in the best ways, the outcomes will be much better than if they are managed in the worst ways"

x.com/RayDalio/status/19169677

X (formerly Twitter)Ray Dalio (@RayDalio) on XIt's Too Late: The Changes Are Coming
#USA#Trump#Geopolitics
Public
MediaFaro Analysis

Putin’s money machine is sputtering.

After years of resilience, Russia’s economy is slowing down. From Kaliningrad to Vladivostok, something has changed.

A high-frequency index produced by Goldman Sachs suggests that, since the end of last year, Russia’s annualised economic growth has fallen from around 5% to around zero.

Russian development bank VEB finds similar trends in its monthly growth estimates.

mediafaro.org/article/20250427

#Russia#Putin#Economy
Public
Resl

Everyone talking about which country will be the next global reserve currency issuer needs to read The Global Minotaur by Yanis Varoufakis and consider we might instead collectively insist on the horizontal international monetary system that enables democracies by prohibiting autocracies in its very structure as a public, egalitarian union with recycling mechanisms for both global deficits and surpluses.

#geopolitics#politics#MonetaryPolicy
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