The🌎economy is in a crisis, & yet the dollar is falling. Investors are turning up their noses at US debt, instead snapping up gold & German bunds as "safe assets"
The Trump admin's policies are, to borrow from Bob Gilpin, tarnishing the "prestige" of the US economy & the 💵🧵1/
The Trump admin's policies are, to borrow from Bob Gilpin, tarnishing the "prestige" of the US economy & the 💵🧵1/
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Now, I'm engaging in a bit of conceptual stretching here, but the US economy, & by extension the💵, have benefitted greatly from the aura of "prestige"
When the🌎economy is in turmoil, money flows *into* 💵assets. 3/
It was the US *reputation* as the world's most powerful economy, its currency as the most stable, reliable haven around.
In times of trouble, markets run to prestige 5/
Why? Because it's earned over the long-term. It's very difficult to acquire, and it is incredibly scarce.
The US earned it. The💵earned it. Had it in spades. 6/
In this case🌎financial markets are that social system. Each market participant knows that the other participants perceive the US econ & its currency to have prestige 7/