Right now, the U.S. Dollar Index is trading around 94. When Roach predicted on “Trading Nation” last June the index would plunge 35%, it was trading around 96.
I bet otherwise. I am not joking about that fed tax, it is very deflationary. I bet this is deflationary and the dollar will stabilize to pre covid levels, about where it is. No one is playing with cheap money, that tax is onerous. It is a tax on banking, nothing can be more deflationary for a central bank currency.
But it is a tighter spiral. The deflation affects tax income, and it soon becomes obvious the can will not kick. Even then I think we can finagle a devaluation and still keep direct inflation under 2%, total inflation under 1%. It is unpredictable because we have not yet opened up the bidding.
There is a fair trade in the devaluation, Fed independence, longer, stronger. Greater bank productivity goes a long way. We can do this deal, in five years we be facing a 1% to 0% price inflation, yet again.
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