Chartbook 481 How stable is the profit dollar in an age of “speedball capitalism”?
The dollar remains the central currency of the world economy, but the economic logic underpinning that status is subject to continuous metamorphosis. This constant change leaves us struggling to understand and predict what the behavior of the “dollar system” may be.
The dollar continues to serve as the primary currency in global financial transactions, yet its significance is undergoing a transformation marked by the era of "profit dollar". This change in status is being driven by a move away from the reserve currency model and towards a more portfolio-oriented approach to dollar holdings. The reserve currency system, which was built on the recycling of current account surpluses through US sovereign debt accumulation, is no longer dominant.
Instead, foreign investors are increasingly allocating funds into US equities, outpacing Treasury bonds in terms of value. This shift towards equities has been fueled by the long-term outperformance of US stock markets and the reluctance of foreign entities to accumulate American government debt. The "profit dollar" era signifies a new dynamic in the dollar's role, characterized by financial capital accumulation and the surge of enthusiasm for the "AI trade".
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