Lauren Messner pfp
Lauren Messner
@laurenmessner
Foreign demand. POTUS is establishing early in this term that the U.S. is still the dominant power. No other country is even close to replacing the USD as the world’s reserve currency. With the U.S. flexing, demand for dollars (and U.S. assets) will only strengthen. Hopefully enough to avoid a debt spiral 😅
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res ipsa ☺︎ pfp
res ipsa ☺︎
@resipsa
time and again we see that when the dollar is strong foreigners *dump* US stocks and bonds to cover their own USD liabilities and stabilize their local currencies. a strengthening dollar increases borrowing costs at a time when demand for US bonds is already low and debt-to-GDP is at 123%. we can’t afford raising rates because of high debt payments. normally this is a time for financial repression but high inflation remains a looming issue. we need GDP growth. a strong dollar is already deflationary. lowering demand for US goods coupled with hawkish immigration policies exacerbate the US debt crisis.
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Lauren Messner pfp
Lauren Messner
@laurenmessner
Fair— Foreign selling happens, but let’s not ignore capital inflows—especially if GDP growth picks up. POTUS is actively pushing for onshoring + higher tariffs, both of which boost domestic production and GDP (if successful). Stronger growth attracts more investment, keeping demand for USD assets high. The real risk isn’t the strong dollar itself—it’s whether we capitalize on it through productivity and investment, or keep pretending we don’t have a debt problem
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res ipsa ☺︎ pfp
res ipsa ☺︎
@resipsa
capital inflows don’t fully offset foreign selling—when servicing USD debt gets expensive, foreigners sell bonds, which pushes yields higher, which then tightens financial conditions and slows growth. onshoring is not an automatic fix— it’s expensive and takes decades to rebuild supply chains. in the short term, we would more likely import from higher-cost alternatives, which drives up consumer prices and reduces purchasing power. domestic industries may gradually grow, but at the expense of higher inflation. historically a stronger dollar leads to weaker exports, lower corporate earnings, and slower GDP growth. it ultimately reduces capital inflows over time.
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