Behind Market Declines Around the World: The Self-Reinforcing Dollar System
The more concentrated global risks become, the more investors value safety and liquidity. The dollar system’s advantages are repeatedly reinforced by this demand: stocks can fall, but U.S. Treasury bonds can still attract some safe-haven funds.
Foreign investors made net sales of nearly $20 billion in Korean stocks and bonds in September; the Philippine peso hit a then-record low on October 21; and France’s fiscal and political risks pushed the spread between French and German government bonds to its highest level since 2011. The causes of stress differ from place to place, but investors face the same question: keep taking on local risks, or move first to somewhere that’s easier to exit?
Tensions in the Middle East added another layer of pressure to this chain. On October 22, Houthi attacks on Saudi Arabia stoked supply concerns, sending oil prices to a five-month high. For energy-importing countries, rising oil prices mean higher import bills, business costs, and inflationary pressure all at once. If the local currency also depreciates, energy paid for in dollars becomes even more expensive, making central banks less comfortable easing policy.
The dollar’s key advantage is that it is both a widely used currency for financing and settlement and is backed by a vast, deeply traded market for safe assets. Businesses need dollars to make payments and repay debts; institutions need collateral they can quickly convert to cash; and safe-haven investors need markets capable of absorbing large sums. These needs reinforce one another, making the dollar system harder to replace.
That’s why declines in U.S. tech stocks and gains for the dollar system can happen at the same time. Yesterday, the Nasdaq fell 2.60%, while the yield on 10-year U.S. Treasuries dropped from around 5.13% to 4.97%. Investors sold growth expectations and valuation risk, and bought the safety and liquidity offered by Treasury bonds. U.S. shareholders took losses, while the U.S. financing system continued to attract demand.
As risks rise, investors rely more heavily on dollar-denominated safe assets; that reliance, in turn, sustains the depth and appeal of dollar markets. For BTC and AI stocks, the money hasn’t disappeared globally—it may simply be unwilling to take on risk for now!
#股票财报季
The more concentrated global risks become, the more investors value safety and liquidity. The dollar system’s advantages are repeatedly reinforced by this demand: stocks can fall, but U.S. Treasury bonds can still attract some safe-haven funds.
Foreign investors made net sales of nearly $20 billion in Korean stocks and bonds in September; the Philippine peso hit a then-record low on October 21; and France’s fiscal and political risks pushed the spread between French and German government bonds to its highest level since 2011. The causes of stress differ from place to place, but investors face the same question: keep taking on local risks, or move first to somewhere that’s easier to exit?
Tensions in the Middle East added another layer of pressure to this chain. On October 22, Houthi attacks on Saudi Arabia stoked supply concerns, sending oil prices to a five-month high. For energy-importing countries, rising oil prices mean higher import bills, business costs, and inflationary pressure all at once. If the local currency also depreciates, energy paid for in dollars becomes even more expensive, making central banks less comfortable easing policy.
The dollar’s key advantage is that it is both a widely used currency for financing and settlement and is backed by a vast, deeply traded market for safe assets. Businesses need dollars to make payments and repay debts; institutions need collateral they can quickly convert to cash; and safe-haven investors need markets capable of absorbing large sums. These needs reinforce one another, making the dollar system harder to replace.
That’s why declines in U.S. tech stocks and gains for the dollar system can happen at the same time. Yesterday, the Nasdaq fell 2.60%, while the yield on 10-year U.S. Treasuries dropped from around 5.13% to 4.97%. Investors sold growth expectations and valuation risk, and bought the safety and liquidity offered by Treasury bonds. U.S. shareholders took losses, while the U.S. financing system continued to attract demand.
As risks rise, investors rely more heavily on dollar-denominated safe assets; that reliance, in turn, sustains the depth and appeal of dollar markets. For BTC and AI stocks, the money hasn’t disappeared globally—it may simply be unwilling to take on risk for now!
#股票财报季