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Yes, I knew fed has been decreasing it's balance sheet because they were trying to tame inflation. But we have a debt based economy. Less money in the system means less liquidity. Which should help inflation but that's not really going to help inflation until 2nd and 3rd order effects. But less liquidity also greatly heightens the chances a bank can't cover it's debts. People go diliquent on loans and someone blows up. Triggering more printing to pump liquidity and save the banks.

Laeserin 11mo ago

People offshore are also increasingly desperate for dollars. They can't transact as efficiently, with their national currencies, so tightening the dollar cripples their businesses.

The dollar doesn't just have to grow with the American economy; it has to grow with the economies of every person using it. That's the downside of being the reserve.

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OceanSlim 11mo ago

Precisely. Debt based currency is the reserve currency for the globe. So tightening causes liquidity crises globally. Which is exactly why Russia and China are trying desperately to stop using it while the third world gets crushed in debt they'll never repay. Their debt is our asset.