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Swirling 'Dollars'

Despite the relative peace and tranquility in dollar-denominated credit markets at present, the "dollar" itself continues to rise. Clearly the acceleration of that trend has waned in recent weeks, but nonetheless is still moving upward to the point that is the highest level in more than a decade. Somehow most commentary takes such a massive and sustained move in stride, as if it were a reflection of purported economic strength in the US or at least the end of ZIRP's "favorable" impression on interest rate differentials (and even a combination of those two). If that were the case, then it would be the first time under the wholesale money system's dominance that the "dollar" acted in such a fashion.

The last time the US economy was acting even slightly "robust" was during the last, great housing bubble in the middle of the 2000s. Beginning in June 2004, the FOMC began to increase interest rates as Alan Greenspan judged his efforts as fully completed. Yet, despite rising nominal rates across the shorter end of the yield curve, the "dollar" did not rise and instead moved opposite. Read more