The Most Important Global Indicator Is SKYROCKETING
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The U. S. Dollar is one of the best and most reliable indicators for global risk that we have. Contrary to how IT sounds and what everyone says when the dollars going up, that's a warning sign and the father and investor IT goes, the more you need to pay attention to IT, it's why the dollar goes up that such a source of confusion.

Therefore, what you need to pay attention to and to clear that right up and leave you with zero doubt today, will get to two of the cleanness examples of counter part currency values to the dollar that you can get. We're talking about india and south korea, the rupee. And the one one is likely to be the world's next rising power, the other and other economic powerhouse all its own, especially where IT comes to trade.

The most essential parts of the modern world and sure of both of those currencies just hit new lows against the dollar for the rupee after the latest start drop. It's another record law. We might not realize that india's currency has repeatedly signal global trouble, including one of the most astounding and profound correlations during the two thousand eight crisis.

The reason is that during times of turmoil, the euro dollar system imposes a risk premium on other countries and other currencies, a higher cover charges. I called at my last video to participate in the global monetary regime, and in that video I showed you the euro in the end, which were very good illustrations of this risk premium. But here in this one, we've got the rupee and the one two that are even Better and cleaner examples.

And like I said, there's are both down sharply here in november twenty, twenty four. It's not trump, it's not j power. It's not interest strates, its risk premium. So let indian south korea show you all about the risks and risk premiums and conditions from their own unique perspectives. And what they have to say is what you need to pay attention to.

And just to start out here, let's go back to two thousand one, as I did in my recent live stream video, because two thousand one, there's lots of parallels, including the behavior of the dollar. And in two thousand one, contrary to popular perceptions, the federal reserve was cutting rates, interest strates are going lower, and yet the dollar was screaming higher because the risk premium was becoming very big based on the global economy heading toward the dot com recession. So we will start here with the X, Y is a dollar in next before getting into the rupee and the one.

But in january two thousand one, Allen Greenspan began cutting rates aggressively, a series of five consecutive fifty basis point rate cuts, and then another twenty five on top by july of two thousand one. Don't forget, as I mentioned on the live stream too, we also had the new bushed administration unleashing tax cuts, and there was perceptions that a new administration would be different from the old one, and therefore, that could possibly be Better despite what should have been very big positives from january to july two thousand. One dxy sod sword from one or eight to one twenty one, even despite the fact effect was lowering interest rates and that market rates were going down, the dollar was surging.

why? Because of the dot conversely sion, the that conversely sion was not A U. S. phenomenon. IT applied globally.

There was a global downturn in two thousand and one that's why the dollar was screaming higher. IT wasn't king dollar. When IT goes up, the that's the bad news.

And the question always is, is how much is IT going up and is IT going up in a way that we need to say, what is IT really telling us? And one of those current season, which the dollar was going up against, was india's rupee. The rupee I was fallowing from two thousand through two thousand two, which is the global dot commerce session era, the dog.

Conversely, sion impacted really all parts of the world, including india, which had reformed its economy. One thousand nine ninety is one and was becoming one of the biggest beneficiaries of the euro dollar globalization period. So IT was very highly correlated in and synching ized to the rest of the global economy.

So the rupee is a canary in the coal mine of sorts for these global cycles, and especially the euro dollar cycles that began to develop more more. Finally, starting in two thousand seven, with eo dollar number one, or what people called the global financial crisis, when IT wasn't really financial crisis. So the eur rope's correlation is with global funding conditions, including solidly studying correlations with these eo dollar cycles.

And one in particular, the rupee had responded through the middle two thousands as the global economy recovered because that's the correlation, the dollars exchange value decline during reflationary or legitimately expanding periods and IT rises when the risk premium rises for economic and money ary reasons, saying with the rupee IT recovered from its two thousand to low and began to strengthen in again through the middle thousands as a global economy picked up. But as we started toward sub prime mortgage ages, which wasn't really the issue, dollars shorts had developed in two thousand and seven, the rupee would peak an exactly october sixth of two thousand seven. And from there IT would plunge through the last, the rest of two thousand and seven, two thousand eight.

And I I wouldn't bottom out until march night of two thousand nine. And if you're like me old enough to remember the two thousand and eight crisis, you'll know immediately what those dates signalize y october nine to two thousand and seven in march ninety, two thousand and nine. Those are the exact dates.

The S. M, P. Five hundred hits record high and its ultimate crash low. So the rupee corresponded with the crash in the stock market as the ultimate risk of signal. Now not saying that the rupee in the stock market were connected, but they were reacting to the same, not exactly the same in the same way, the same time, but enough that what the rupee was same was pressuring the rupee was the same thing that was pressuring the stock market, which was the europe dollar retreat, the global economy heading into really bad times with the, with the great, not recession.

And of course, we need to point out, just like I didn't two thousand, one interest strates were going down at the same time, the rupee was the dollar was going higher, that that's the bad news. And IT continued right through the twenty tens in these various Eudora cycles. The rupee rebounded with reflation in twenty ten and twenty eleven, though that was rocking in twenty ten and twenty eleven.

So the rupee was a little bit volatile. IT peaked an August first of twenty eleven during that banking crisis to flare up on the banking crisis, the federal reserve talking about having to bail out the repo market, european and banks that were experiencing massive dollar shorge. Suddenly, the rupee pigs and IT starts to head down through the rest of twenty eleven into twenty twelve.

And again, interest strates were going lower during the same peer because, of course, it's all tied together. Higher global risk premium on countries are around the world accessing the doll system. Therefore, lower current exchange views against the dollar lower illustrates in the us and other places, signifying lower growth and inflation expectations and higher demand for safety and liquidity.

The one time that you can make a correlation with industry tes was in twenty thirteen. Well, much of the global system was recovering from twenty twelve. There was a reflationary period, and U. S.

Interest strates were rising in the middle of twenty thirteen, not because the fed was was doing something, but because the market was starting to believe that maybe reflation was legitimate recovery this time. So rates went up and the rupee, like a lot of currencies, plunge in the middle of two thousand thirteen. But there are also other problems in the world that likely had an impact in that in in that too, including what was going on in china during the summer tyber.

In two thousand and thirteen, there was eventually emerging emerging market currency crisis, which the roping was caught up in with two. But the rupee, like a lot of currencies, also rebounded later twenty thirteen and into twenty fourteen. And everything that happened in twenty thirteen contributed to what we call your ordeal number three, which erupted in twenty fourteen.

And sure enough, the rupee would peak in may of twenty fourteen, just as ripple fells were starting to rise. And eventually, couple months later, oil Prices would begin to crash, demand fell off sharply, china fell into really tough times, emerging markets were devastated, and the rupee would continue to steadily decline throughout the rest of twenty fourteen, twenty fifteen and on to twenty sixteen. And again, once more long term industry tes, we're heading lower during that period on lower growth expectations, which are bad for the rupee.

Higher risk premium in the europa system, though I will point out, shorter industries began to move fast, modestly higher as the fed transition to its rate hiking based on those reflationary conditions. But IT was not about interest strates, it's about the risk premiums. So we move forward the rest of twenty sixteen and two thousand seventeen, we have a reflationary appeared again, what was called globally synchronized growth.

And the rupee would continue to strengthen. And even though industries were rising in the us, dollar terms reflection across the rest of the world. And then I would peak in january twenty eighteen. Then I would accelerate this decline after April of twenty eighteen, really April eighteen or twenty eighteen, leading to the famous up from urgent patel, who is the governor, a reserve bank of india.

The time where he said, quote, dollar funding has evaporated, basically pegging what was going on IT with the currency, really not just the rupee, but all around the world, is higher risk premium leading to more difficult funding conditions. That's what really talking about with the risk premium IT means more difficult funding conditions. And he was the reserve back of india's governor saying in the little twenty, twenty eighteen, that's what happened, that what was happening, and that's what he tied the currencies weakness too, as you should.

Of course. He then blame the federal reserve, the federal reserve rate hikes and qt, four dollar funding evaporating. You can't blame because you that's that's what economists do.

Is everything always about the fed? But essentially he identified the effects without being able to connect IT to the cars. Either way, the rupee continue to fall throughout twenty twenty. We also have to note that india, at the time in twenty eighteen, was grappling with a shadow banking problem, which also amplify these global pressures.

In one reason why the rupee had such a bad performance in the first half of twenty eighteen, and though the rupee would rebound IT in early two and nineteen, IT began to tumble all over again when the us. us. Treasures you curve inverted and rates were going lower.

In twenty nineteen, the fed was cutting rates as the world started to to started to come to grips with the possibility of a recovered recession. Of course, the rupee was heading lower into twenty twenty, and that brings us to the current period a year. Dollar number five, the downside.

Of the supply shock, the rupee would peak in may of twenty twenty one, which was to peak for reflationary conditions because up until that point, the world appeared to be heading in the right direction. And while from to most people continue to move in the right direction, if not too high or too well, the ruby, like the euro dollar stem, began to understand that that part of the supply shock would eventually be would eventually bring about its downfall. Prices were coming.

We're going too high for what's the fundamental conditions could actually support. And eventually, they would lead to the downside of the supply shock, which the rupee was picking up as a as a growing dollar risk premium. And IT really accelerated lower in january of twenty twenty two. Even though rates were rising, we saw the curve inverting really drastically in two thousand twenty two and grup y really plunged in the middle of that year as the global economy was shifting from the supply shock upside to the supply shock downside.

And that was the rising risk premium in the ruby in twenty twenty two in october of twenty two, around october twenty and twenty two, the reserve bank of india began to regularly intervene to slow that appreciation down, and we've had a lot of success in doing so. But they haven't been unable to change the relationship nor to change this reject oring. What that means is that the reserve bank of india is essentially absorbing a lot of that additional risk premium since october of twenty twenty two.

But even so, rupee continues to go lower, including over the last year since the global bond rally began. So illustrates moving lower in us solar terms around the rest of the world to since october twenty twenty three. And the rupee keeps going down anyway.

And you can see there's a pretty good, good correlation from last summer, August to twenty twenty three, the rupee made of serving next stage, moving downward at the same time. Of course, we see other dollar funding signals like swap spread start to really tell us that trouble was brewing there as well. So it's a corrugation ate signal.

It's a historically validated signal that tells us there is growing risk perceived by the euro. la. System also acted upon in this growing and rising risk premium. That's what the rising dollar is. And this despite the fact that india's economy has performed well, way Better than its peers over the last several years.

The concern here, what's really driving the risk premium is that much of that economic boom has been purchased on purchased too much on artificial means and temporary means. The government has made massive amounts of investments that some of them don't look like they're paying off nearly much as as had been hoped and expected. There's also been importantly, a shadow lending boom in the last couple years as well, not like twenty eighteen.

And more recently, some shadow lenders are beginning to report concerning results and a deterioration in their quality metrics. So what the ur dollar Price premium is, the lower rupee against the U. S. Dollar exchange valley. What that tells us is that the risk premium is rising for india for a couple of reasons.

First of all, maybe the economy is that as sustainable and strong as IT appears to a lot of people and therefore in is at risk of suffering a setback, some similar to twenty eighteen, including potentially banking and credit irregularities on top, and that the global economic conditions can exacerbate those problems. So you combine those two together. And it's one reason why as the global economy moves further and further along the downside swing of the supply shock, the more there are risks building up outside of india as well as potentially inside india.

And it's the same thing for south korean won, which south korea far more directly tied to china. But IT isn't necessary just about china because the chinese economy goes where the global economy is heading anyway. So south korea wants, just like the rupee corresponds with this global risk premium, with a heavy emphasis on the chinese part of the system.

Again, it's not interest strates. It's not the fed IT wasn't biden. IT wasn't trump before them. IT wasn't the incoming trump t administration. It's about how the global economy and the chinese economy connect together. So you see a rebound in the medal twenty twenty in the korean one, with the supply shock upside beginning to develop.

But the one started to turn around in jane way of twenty and twenty one, sensing trouble, especially with related to china, the supply shock recovery in all the Price pressures on everything else were becoming too much to ignore, too much to just consider, blindly believe that these were good times that were gonna forever. And also remember the direct impact that creates itself. The supply shock means the country needs more dollars in order to buy things in import goods and services into the country.

Anyway, so by september and october twenty, twenty two, you've got both of these currencies. China, you won, as well as korea. One, they were absolutely plunging dollars. Sure, a huge risk premium, but both of them bottom out and rebounded in late twenty twenty two as china reopening became more and more of a possibility. So there was the optimism that maybe china's reopening would allow the global economy to breathe a little bit and potentially actually start to recover itself.

But IT didn't last very long, though the lw rik ceded IT a lot, the one and the u on to rebound in the end, two IT didn't last very long because the urd ula system quickly realized china's reopening wasn't going to be the pain of sea that most people hoped that would be, including those in authority in china. So essences, you had to return back rising risk premium. Ever since around january, february of twenty twenty three, the one has kept to its trend, and that trend is rising.

Your your dollar risk premium tie to the realization of the downside of the supply shocks and what that was going what that is was and is still is going to do to the global economy and continue to impact china, therefore, south korea. So we have the dollar that is threatening to break out of its recent range, which grabs are attention for all of these various reasons, not because of the fed, not because of industries, not because of thumb, because what history shows when the dollar does. So dx y is up, the euro is down, the yen is down, the rupees at a record low.

South korea one is is at a multi year low. Higher dollar equals nothing good. But it's it's about conditions in the real economy and how the monetary system reacts to those as well as effects them.

These are more warning science at the downside of the supply shock is not done. In fact, there's more or to IT and there really might be a next stage coming. Those risks obviously apply to china, and there's growing worries. I can't stimulate its way out of this mess to europe.

It's facing worst recession than the one is spent for two years till the us, with the us continues to face more than just persistent recession questions to south korea, which tells us about china in asia and to india, where your dollar risk premiums are applied in the most consistent fashion of all. So I really want to pay attention to india, as I said throughout this video, is not jack power. It's not interest strates, it's not trump, it's the euro dollar risk premium.

And as the risk premium appears to be going up yet again, that's all about the downside of the supply shock is going up because the downside to the supply shock is not done. If you want to go back and look at that video about the yen and the euro, that's the one i've got link below. You're at all risk premiums in both of those is always thank you very much for joining me.

huge. Thank you. You're all university members and subscribers. And until next time, take care.