Well, other than the obvious like trillions of dollars being printed not being good, ha ha.
This is a misnomer. Trillions of dollars was not printed. Few understand what the Fed does and how money is created.
USD (the money supply) expands when lending takes place. It is the commercial banks that create the USD, not the Fed. Their QE to infinity programs only print up bank instruments that go on the balance sheet of depositing banks. This is non legal tender and is housed at the Fed. Hence the banks can use it at all other than to keep it there and earn interest.
That is why there is a USD shortage (liquidity crisis). Banks havent been lending to keep pace.
As for the impact, it makes anyone with USD denominated debt (most of the world) have to pay more. So countries will have to sell their treasuries (an asset) to get USD. Also, companies will have to use more of their native currency to get the USD to make the payments. This affects the developing countries first but then spreads.
Also, this tends to make all commodities more expensive, in the native currencies, since they are all prices in USD (as if the supply chain issues werent doing enough of a number on that).
Finally, it makes exports to the US more attractive but hurts all imports. While this is good (the exports) if the economy is slowing, that makes the counter balance not enough to make up for the increase in imports.
Of course, the liquidity issue is one of the reasons for the slowing of global growth. Without enough money, economies cannot expand.
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Thank you for the detailed explanation. Yes getting a loan in USD abroad seems like a bad idea if you are living somewhere that loses vs the USD! Same reason why you dont wanna owe in BTC!
Well, more broadly, I have often thought about banks creating inflation more broadly, as when you bring the bank a physical dollar and deposit it, the physical dollar is in one of their vaults, and it then a 2nd credited to your account as a digital dollar, AND they lend out a large fraction of the same dollar, if my understanding is correct. But I do not have a detailed understanding of the banking system or the Fed.
But are you basically saying that the strengthening of the dollar causes more of other foreign currency to be tied up due to the need of saving a higher % of income to repay debts, and that is what is causing problems, or am I misunderstanding?
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