THE U.S. DOLLAR AND THE WORLD ECONOMY
The medium-term realities at global level and the expectations that take them into account and the conditions that make it possible to meet short-term needs are not compatible; while the first one feeds the tendency to avoid risk, the other requires precisely the opposite. When one of them comes to the forefront, it causes the other to be ignored! As such, price volatility is inevitably increasing, and the likelihood that the fluctuations become more and more destructive is getting stronger.
The rhetoric and actions of the new US administration point out that protectionism in the medium term can become increasingly strengthened. It is worth noting that ignoring this and other influences on all other trends means that you will have to face much more serious costs in the future and that nothing will remain the same. This fact disturbs those who are responsible for the frailties created by globalization and those who are at risk beyond normal; they are forced to admit that fear will not change their fate!
The strengthening of protectionism in the medium term means the strengthening of risk aversion and the increase in the systemic fragility. Global trade volume will start to shrink very sharply; the highly corrupted financial structure will start to disintegrate due to the uncontrolled increases in non-performing loans. Global problems that can not be solved by consensus will be tried to be overcome with cold or hot conflicts. All priorities and strategies will have to change, capital movements will shrink. Price volatility will increase and balance sheets will be worn out; the negativity in economic expectations will become chronic. The interventions in favor of the planning but against the market will increase and will become diversified. The ones who got into deep relation with the lawlessness called globalization or those who depend on taking big risks will the ones who will be the most worn out.
The tendencies that are briefly summarized above and the pricing the trade battles that the new US administration has ignited mean that the market is cutting it's own throat. Because of this, they are ignored and the overthrow of the complaint about the overvalued dollar is used as a justification to turn the agenda into their own favor and create opportunities to reduce their risk! They try to market the depreciation of the dollar with the interpretation that the risk appetite has begun to return; in order to gain some time and to save themselves, they cannot find anything else other than trapping those who do not understand what's going on!
The argument over the value of the dollar is not very meaningful for an understanding that is seeking the solution in protectionism. As the strengthening of the dollar will cause the inflation and the rise in interest rates to become more limited, those who embrace conservatism will not sincerely oppose it; it is of a tactical nature to speak of it, it is used as justification for some new initiatives, and is nothing more than a compulsion to compromise the other side. Through the rhetoric of the value of the dollar, it may be nothing less than a blissful appreciation to say that the new administration has distanced itself from the protectionist understanding!
Medium term trends indicate that protectionism will be strengthened, the tendency to avoid risk will be more decisive and the dollar will continue to appreciate for a while, even if it fluctuates wildly. This picture does not say good things to the emerging economies and the financial markets, especially to the countries that have serious levels of saving gaps.
