Jasz
VIP Contributor
Americans are often told that the US dollar is strong because it's the world's reserve currency. But this isn't true. The reason the US dollar remains strong despite the economy being imbalanced is because of its size and power in international banking. The Fed does indeed control the monetary supply, but not all of it.
There are many major central banks in other countries that do have a say on how much money is printed, and they have been increasing their purchases of U.S. debt as well as buying up stocks and bonds since 2008. We call them "exchange rate regimes." They don't follow US policy so much as they mimic it by buying lots of dollars with their own currency, which makes them stronger and us weaker.
Theoretically, these countries could dump our debt if they wanted to make a point about the Fed's policies—which is why we're basically printing money for free right now—but nobody wants to do that because it would hurt their own economies too much.
There are many major central banks in other countries that do have a say on how much money is printed, and they have been increasing their purchases of U.S. debt as well as buying up stocks and bonds since 2008. We call them "exchange rate regimes." They don't follow US policy so much as they mimic it by buying lots of dollars with their own currency, which makes them stronger and us weaker.
Theoretically, these countries could dump our debt if they wanted to make a point about the Fed's policies—which is why we're basically printing money for free right now—but nobody wants to do that because it would hurt their own economies too much.