I'm not convinced that the current strength of the dollar has anything to do with US being the safe asset to the world. It could be simply that we are planning to raise rates more aggressively than the ECB, BoE, BoJ, and the like.
The USD being the safe haven asset to the rest of the world has been a huge plus for the, more oblivious than ungrateful, USA. Yet this has long been known to most who studied Econ. The idea that punishing bad actors by freezing their assets will increase the safe haven value is novel - my own prior assumption was that such a contract violation would lessen the desirability for others to enter a similar contract. I could well be wrong - but so could they.
The increased fluctuations of dollar values reflect the highly increased uncertainty - and a possibly temporary strength doesn't prove nor disprove any medium / long term theory.
I suspect they might be correct (40%), but for reasons they don't explicitly discuss:
As globalization creates interconnected trade & capital flows, and especially cosmopolitan elites, the financial punishment of Putin is a plausible argument to stop Xi from invading Taiwan. And to assert more strongly that countries can NOT invade "innocent" neighbors. Like Saddam should not have invaded Kuwait in 1990 (nor, arguably, Iran earlier).
Establishing an ever stronger inviolability of agreed to borders can hugely bolster the value and security of Foreign Direct Investment throughout the world. Tho Dooley et. al. might claim this was an unspoken part of their "punish bad behavior" argument.
They could easily be wrong (60%) in the mid term 2-5 year time frame: Russia and India do more trade, in Rubles. Russia and China do more oil, gas, resource trade, in Renminbi (or Chinese Yuan or Rubles). The values are tracked by conversion rates with US Dollars (or Euros?), but are legally done in other Great Power currencies. This begins the weakening of US dollar dominance in a viable alternative with increasing trade.
But even if this trade hugely increases, the USD trade might well increase faster and to a much higher level.
I want peace in Ukraine. I also want justice, and for Ukraine to not lose the Donbas - altho Crimea is more realpolitik likely to remain Russian. Ukraine doesn't get the justice without a LOT of fighting and dying, of Ukrainians and Russians. As long as the Ukrainians are willing and able to fight against the (literally!) Imperialist invaders, we should support them as best we can.
Our support should include paying the higher costs, lower standards of living, on NOT trading with Russia, which had been win-win, so instead we accept the lose-lose of Russia not trading with us. More financial pain for Russia means they'll be more eager to agree sooner to a less desirable peace.
I don't worry that bad actors might not look at the USD as a safe haven. The rest of the world should rightly believe that they will not be targets of confiscation/freezing of assets. At least I hope the latter is true.
I'm not convinced that the current strength of the dollar has anything to do with US being the safe asset to the world. It could be simply that we are planning to raise rates more aggressively than the ECB, BoE, BoJ, and the like.
Another related example is that for all our supposed exorbitant privilege, US interest rates are generally higher than those of our rich world peers (https://www.econlib.org/myths-we-teach-our-children/).
The USD being the safe haven asset to the rest of the world has been a huge plus for the, more oblivious than ungrateful, USA. Yet this has long been known to most who studied Econ. The idea that punishing bad actors by freezing their assets will increase the safe haven value is novel - my own prior assumption was that such a contract violation would lessen the desirability for others to enter a similar contract. I could well be wrong - but so could they.
The increased fluctuations of dollar values reflect the highly increased uncertainty - and a possibly temporary strength doesn't prove nor disprove any medium / long term theory.
I suspect they might be correct (40%), but for reasons they don't explicitly discuss:
As globalization creates interconnected trade & capital flows, and especially cosmopolitan elites, the financial punishment of Putin is a plausible argument to stop Xi from invading Taiwan. And to assert more strongly that countries can NOT invade "innocent" neighbors. Like Saddam should not have invaded Kuwait in 1990 (nor, arguably, Iran earlier).
Establishing an ever stronger inviolability of agreed to borders can hugely bolster the value and security of Foreign Direct Investment throughout the world. Tho Dooley et. al. might claim this was an unspoken part of their "punish bad behavior" argument.
They could easily be wrong (60%) in the mid term 2-5 year time frame: Russia and India do more trade, in Rubles. Russia and China do more oil, gas, resource trade, in Renminbi (or Chinese Yuan or Rubles). The values are tracked by conversion rates with US Dollars (or Euros?), but are legally done in other Great Power currencies. This begins the weakening of US dollar dominance in a viable alternative with increasing trade.
But even if this trade hugely increases, the USD trade might well increase faster and to a much higher level.
I want peace in Ukraine. I also want justice, and for Ukraine to not lose the Donbas - altho Crimea is more realpolitik likely to remain Russian. Ukraine doesn't get the justice without a LOT of fighting and dying, of Ukrainians and Russians. As long as the Ukrainians are willing and able to fight against the (literally!) Imperialist invaders, we should support them as best we can.
Our support should include paying the higher costs, lower standards of living, on NOT trading with Russia, which had been win-win, so instead we accept the lose-lose of Russia not trading with us. More financial pain for Russia means they'll be more eager to agree sooner to a less desirable peace.
I don't worry that bad actors might not look at the USD as a safe haven. The rest of the world should rightly believe that they will not be targets of confiscation/freezing of assets. At least I hope the latter is true.