I am a complete ignorant regarding economy but one thing I was quite certain about was that when you print a lot of money, then your currency devaluates. So why given that the US have printed huge amounts of dollars in the last couple of years, the dollar is winning both against the Sterling and the Euro?
Is it just that war in Ukraine have made investors ignore the huge inflation in the dollar?
Maybe after the midterms the dollar could have a crash if the democrats lose?
Most of the money supply is created by private banks, not central banks, by lending.
Anybody talking about 'M1 money' know this btw, and just try to bullshit around to fit their narrative.
Having a country's money devaluate mean that investors aren't confident of the future value of the production of said country. You can devaluate by having high inflation compared to your neighbors, but in this case I'd bet on a confidence crisis. I didn't follow UK politic too closely but they recently ousted their PM? And the Ukraine war doesn't help with confidence. Also the trade numbers seems to not have recovered from COVID-19, unlike most EU countries, which cannot help.
That inflation is primarily a monetary policy issue is an old economist orthodoxy. It's not true per se, or because it's been said n+1 times behind a pulpit.
If you look at St Louis' Fed plot charts, you see that if the relation was as prominent as it's made up to be, we would have had inflation for the past decade. This hasn't been true.
A wide majority of the money printed has actually gone to institutional investors and the financial markets, which have experienced a so-called inflation (in a sense, because by definition inflation is only concerned with consumer goods).
The dollar is winning against the euro and pound because the dollar still remains the world reserve money, a very important role the US government has defended since the end of world war 2.
Inflation in Europe is in a large part a supply shock with deep industrial ramifications. Since there is no russian gas anymore, there's been a scramble to buy it wherever else, often at a premium, which debases the currency and leads to inflation as gas is key to energy generation and important industrial processes, notably in germany.
The US enjoys a relative self-reliance energy-wise, which is important for domestic stability, but also allows the US government to sell energy abroad, reinforcing its currency comparatively.
If a currency is mostly used locally, the effects of printing it can't be diluted away and are locally concentrated. If the currency is global, the issuer can just print it, reap the benefits, and let others soak most of the damage. For example, say Argentine prints lots of Pesos. They don't circulate a lot outside the country itself, so it's mostly cash in argentinians hands that devaluate. Now, say US prints lots of Dollars. Many countries have large dollar reserves, so those are screwed by devaluation, as they soak the brunt of the burden that would be from US citizens alone, if the dollar were just another local currency.
The usual theory is that the US is not alone in experiencing inflation (or having printed huge amounts of money), but as it still is considered a reserve currency and seems to care quite a bit about getting inflation under control (in addition to having a track record of having done so), investors often assume it will recover more quickly than other currencies, causing them to dump their local currencies to put their wealth in the dollar until the economic storm has stabilized some.
Exchange rates are relative. The US still has significant inflation, which is a result of (among other things) years of loose monetary policy. And the EU and UK central banks have also been printing for years. The US is quicker to hike interest rates (effectively, reversing the money-printing process) which is one reason why the dollar is strengthening against the other currencies.
Just because the US printed a lot, doesn’t mean others haven’t done it as well. In fact, the EU printed more money in absolute terms and especially compared to size of their economy.
And as others said, while inflation in the US comes from higher cost for labor, in the EU inflation comes from very high energy costs
Is it just that war in Ukraine have made investors ignore the huge inflation in the dollar?
Maybe after the midterms the dollar could have a crash if the democrats lose?