From what I know, if a country prints a lot of money, the value of it’s currency falls, and thus inflation increases.
But I am not able to understand the following.
USA printed a lot of money during covid.
Then there were reports that because of all this money printing the inflation will happening. and we are seeing high inflation in USA right now.
BUT the value of dollar is increasing compared to other currencies (EURO, YEN, INR, etc).
Thus, we can see that printing money increased the value of money. this is opposite to general understanding (what I wrote in first line).
can someone please explain why this is happening ?
Because this way, USA can keep printing money without worrying about the value of their currency going down.
One reason could be that, the black money ( and proceeds of criminal activities ) of the entire planet is stored in as physical dollar notes, as seen in hollywood movies and netflix shows.
The more dollar notes gets printed, the more it get absorbed for storing such illicit wealth of the planet.
Higher denomination dollar notes are sold for more than its face value in the black market.
Previously Gold bars was an option for storing such illicit wealth. Now since the new generation gold bars are getting mixed with tungsten ( it is becoming more and more difficult for these halfwit dons and dealers to identify a fake gold bar at the time of purchase ), Physical Dollar notes are high in demand.
I believe it is because during uncertain geo political environment, people tend to go for safer haven currency and USD is one such currency. When everyone wants USD, dollar becomes stronger. Oil/Crude is mainly bought and sold in USD (same with Gold) and when price of Oil/Crude increases, there will be a demand for increase in USDs.
Disc: These are my personal views and I could be totally wrong…
It’s real simple. It’s because petro dollar is still there. What do I mean by that ?
Most oil in world is sold in dollars for the majority. Means if you want to buy crude oil you need to convert to buy USD with your currency and then USD to buy crude oil. This is where majority of demand USD Is created.
Saddam Hussein used to trade crude oil in euro and you know how Iraq got freedom. Libya dictator Gaddafi tried to create gold dinar and tried trading crude oil with that and we know what happened there. Syria tried selling crude oil euro and we know what revolution happened there.
Now Iran doesn’t trade crude oil in dollars which is why they are banned from swift system altogether. So do you see the things now.
Petro dollar has weakened a lot and there would be a day , dollar as reserved currency might go day. Also most south american countries are dollarised , if you go to Peru , Bolivia they use their currency and also directly accept dollars straightaway. This is why dollars are quite strong. Another reason they are strong is along with FED reserve all the central banks printed money during covid , so it’s double whammy because currency depreciated along with rise in crude oil barrel.