![]() So not only do we use the dollar for our local day-to-day business and purchases, but the dollar is also used throughout the world. And the reason is because, with the United States being the global leader, the global hegemon, we have the global reserve currency. Why is the dollar getting stronger - and why should people care?Īs Americans, we are trained to think in one currency - that being the dollar. Johnson, who thinks in real time about financial news on Twitter under walked us through the logic that led him to predict these events and what he sees happening next. (In another commonly used metaphor for this idea, the dollar gets so strong that it becomes a financial wrecking ball, smashing overseas economies large and small.) Over recent weeks and months, the greenback has strengthened enormously against all the world’s other major currencies, from the pound and the euro to the Japanese yen and Chinese yuan - creating an increasing amount of chaos in financial markets, with Great Britain at the top of the list. ![]() ![]() financial system’s strengths - especially the value of the dollar against other currencies - can end up hurting the rest of the world and may end up, eventually, making things even worse domestically. To get a better understanding of what’s happening at a structural level, I spoke with Brent Johnson, the CEO of the financial-advisory firm Santiago Capital, who laid out the problems in the global economy years ago with his “Dollar Milkshake Theory.” The core of his thesis has been that the U.S. prime minister Liz Truss unveiled a budget proposal that, during normal times, would have been unremarkably conservative - but instead triggered a deep sell-off in the British pound, nearly triggered a Lehman Brothers–like domino effect, and compelled the International Monetary Fund to regard the United Kingdom like a struggling third-world economy. ![]() Last week, that reality became more apparent after new U.K. The view from beyond our borders, however, has largely been even bleaker - so bad that the American economy is now viewed as an enviable bastion of strength amid a collapsing global system. Daniel Day-Lewis’s character inspired the “Dollar Milkshake” theory. ![]()
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