the global banking system was suffering from a liquidity crisis. There are not enough US Dollars in the economy due to the fact commercial banks have not been lending
How did you notice the global financial system suffering from a liquidity crisis?
You talk about the dollar then, but this is not global.
If you consider the dollar as an indicator of the global economy, it's not like that. In the EU, China, Russia, and basically in most of the rest of the world, the dollar doesn't indicate a liquidity crisis, I'm not sure it ever created a global liquidity crisis.
Moreover, I don't think the US witnessed a liquidity crisis any time since 2007, which was the last time I've heard of this term, but then again, perhaps living in the US gives you better information on this one.
Still, everything I was observing so far was the opposite of a liquidity crisis. Money was flowing like crazy, corporations were presenting huge growth and profits, and lending was once again at the roof.
But, as I said, I'm in the EU, so perhaps my sources concerning the US economy are flawed.
The USD makes up the majority of global transactions. It is the number one holding of Central Bank reserves. The major of FX OTC transactions (like 90%) are in USD. US Treasuries are the only form of pristine collateral right now. About half of all global debt is denominated in USD, which means that entities need USD to pay back their loans (which is why central banks have USD as their primary reserve).
US commercial banks, which are the ones that create USD via loans, saw lending flat since the Great Financial Crisis. That means few new dollars.
We also have low interest rates which means a lack of money. When interest rates are high, that is a sign of abundance. Hence we are in a liquidity crisis of both USD and collateral, the latter which is vital to the international banking system.
The EURO and and YEN are regional currencies with little use case outside those regions. Plus, the US banks will not touch the debt of either of them, forcing another issue that feeds back into those regional banking system.
To say the USD is not global is a mistake. It is throughout the entire global and financial system.
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Sure it is significant and a mistake in the way I presented the case.
Of course it is used universally and the top used reserve for foreign exchange by Central banks.
Thanks for the explanation. I still haven't heard anything about a global dollar liquidity crisis, and felt there was abundance of dollars (and euro in the European region.)
Maybe this is too recent so I haven't found any news about it.
Last time I checked there was abundance of liquidity, thus I considered logical the FED's step to increase interest rates.
https://www.bloomberg.com/news/articles/2021-09-02/the-world-is-awash-in-dollar-liquidity-that-no-one-wants#xj4y7vzkg
If there was a world full of dollars, we wouldnt see:
All of that is indicative of a USD (along with collateral) shortage.
Most of the media doesnt focus upon how the monetary truly works globally.
After all, have you read up on the Repo market? When was the last time you saw a trader from the realm on CNBC?
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Dollar goes up against worse fiat currencies. Strong in this case means it losses less purchasing power than the rest. The rest central banks are doing less to sustain the value of the currencies they control.