DXY CRACK! BAD JUJU!After Trump unilaterally imposed Tariffs (Taxes) on its citizens to buy imported goods from the rest of the world, promising 90 deals in 90 days, "in two weeks", the demand for the dollar payment system has collapsed by -12% reducing purchasing power for all $ holders'.
Imports of goods mean exporting $s to the rest of the world. As a world reserve currency (WRC), the US gets the benefit of seeing those $s invested back into the US. That creates demand for the $ payment system, and raises $ holders' purchasing power, reducing inflation.
What else happens? A bit complicated but I will try to explain. High demand for $ means the US indirectly exports inflation. Meaning, more $ for the same amount of goods and services. However, as a WRC, the US is not really exporting inflation. That is a bit inaccurate bc the US payment system as a WRC is actually includes a lot more goods and services from the entire planet. This makes sense if you think about it. However only going one way, meaning as long as the demand from the world for our payment system, more $ required by the world reflect more goods and services. As such not inflationary.
Now let's reverse it so you can see why it is not entirely accurate. Should the Global Economy (which is worth today about $100 trillion,) demand ever drop off. The $ value will collapse as people sell their $ holdings in exchange for other currencies. What you are seeing right now in this chart with a CRACK in it.
The US GDP is currently about $30 trillion. There is no way! A $ payment system designed for a $100T economy can suddenly absorb all those $ in a $30T economy. Inflation would skyrocket as more and more $ chase the same amount of goods and services ($30T). This is not rocket science. This is basic 3rd-grade arithmetic!
This CRACK! could be very bad JUJU!
CAUTION is in order. Don't let normality bias fool you. No matter how you feel about Trump. It is irrelevant to basic arithmetic.
