How does the US dollar control global economic activity? Zoho CEO Sridhar Vembu explains
Prasannkumar 
Sridhar Vembu, CEO of Zoho believes it is essential that rational beings comprehend the basic principles of the current global monetary system.
Sridhar Vembu, the Zoho CEO, has shared his understanding of how the US Dollar controls and contributes to the global economy in a series of tweets. He believes it is essential that rational beings comprehend the basic principles of the current global monetary system.
He begins by explaining that the US pays countries that export to it in dollars. Countries can also export to US-exporting countries. To claim goods, services, or property, there is no need to return to the US. Dollars start moving around the globe.
International banks start to accumulate more dollars in assets and liabilities based on the real dollars generated by commerce with the US. After many years of this action, the total global dollar bank balances, which are not under Fed jurisdiction, far exceed the US trade deficits or real dollars.
Even though the Fed cannot control these global dollar balances it can make a significant difference through its actions. Real dollars become more accessible when the Fed keeps interest rates low and creates money. Global dollar balances also increase quickly. Everyone seems to be doing well and there are plenty of dollars available.
Some of these rising global dollar balances are returned to the US to be invested in equity or real estate markets. This feels like a period of prosperity for the US due to rising wealth and asset inflation. The US begins to see an increase in consumer prices.
When consumer prices rise, the Fed intervenes and raises interest rates. It also decreases money creation and initiates Quantitative tightening. These are the beginning of problems. Global dollar balances reflect the tighter real Fed Dollar condition. Interest rates are rising. Borrowers now need dollars to repay their debts.
Dollars fall because of the rush to get dollars from borrowers with international debt. In an attempt to raise real dollars, debtors have been selling assets and equity in the US in panic. The US financial markets crash.
The US market is facing increasing global dollar issues, which has forced the Fed to intervene and reduce interest rates as well as printing money. As real dollars become more affordable and readily available, the balances of real dollars increase.
This cycle is causing the US market to crash. It is widely believed that Fed will change its mind. These recurrent cycles have led to global dollar balances that are much larger than US GDP and US assets.
Prasannkumar is a passionate digital marketer and devoted team leader. He loves trying out and sharing the latest knowledge about industry trends, market growth, and keyword analysis with new google and other search engines algorithm. He effectively knows how content feeds into different subsets of the marketing plan and grasps how to develop and share the content assets on the right channels.
