– How can inflation be hitting this hard in the US, when the dollar is getting stronger around the world when compared to other currencies like the Euro?

Question

– How can inflation be hitting this hard in the US, when the dollar is getting stronger around the world when compared to other currencies like the Euro?

In: 16

Answer 1

Because the US dollar is the de facto reserve currency of the world (because it’s used to buy oil). It doesn’t matter how bad the fundamentals of the US economy or US dollar are, the rest of the world needs to hold tons of dollars/dollar denominated debt, to have the liquidity necessary to buy oil.

That demand strengthens the dollar when bad things happen, because every country decides holding a little more reserves is prudent (even when the bad thing is coming from the US. Pretty neat trick.