Strong dollar = International carnage

President Trump’s proposed policies will raise bond yields, lead to a strong dollar against other currencies, and by popping the credit bubble drive the world into an economic slump.

Introduction

In earlier articles and interviews I have drawn attention to the accumulation of credit bubbles which have never been allowed to wash out malinvestments and eliminate debt zombies. Consequently, previous bubbles have been rolled up into the largest dollar-based debt bubble in history, extending risk into other major currencies as well.

So far, US interest rates and bond yields have risen from the zero bound to the five per cent level, which have so far been insufficient to pop the credit bubble. Instead, equity markets have continued rising. But all credit markets have become inherently unstable.

Will a new and unexpected increase in interest rates and/or bond yields pop the bubble? And what will be the consequences for the other major currencies? These are the questions I attempt to answer in this article.