I Read Dr. Paul Roberts – Credibility Beyond

While “penning” the previous post I looked to my girlfriend for a bit of advice.

On occasion it’s been suggested here at the blog that I try to “lighten up a bit” and perhaps try to stay “a bit more positive”. With this in mind, I feel that several months have gone by where my writing in general has been at least “moderately up beat”, and that I’ve done a “reasonable job” as to not get “too down” on any one thing in particular.

I don’t think it’s a secret for anyone reading here, that I struggle with the situation in the United States. I got involved with Forex as to my interests in “all things global” and in this case how “money” plays a role. The fact that the United States holds the world’s “current” reserve currency presents me with a bit of a conundrum as I’m not particularly interested in “American culture”.

Not to say it’s not great, only that – for me…….I would far rather “Bolivia” had reserve status as I could at least “learn something new ” here day to day.

I find the day-to-day situation in the U.S as the number one element in trading forex, that I would much rather “do without”. It’s not interesting and it’s certainly not “fun”. It can’t be ignored mind you – but it’s certainly a drag.

My girlfriend suggested that I “go easy” and of course  – respect the valued readers that take the time to show their support here at the blog and…….yes of course, I truly DO value the readership and by no means want to “get down” on the U.S.

Then it occurred to me….perhaps I should introduce readers to one of the few “other people” I actually take the time to read. I showed Laura. She changed her tune.

Ladies and gentleman I am proud to introduce the critically acclaimed Dr. Paul Roberts.

http://www.paulcraigroberts.org/pages/about-paul-craig-roberts/

If you think I might consider biting my tongue on occasion ( likely never gonna happen) I encourage you to not only read but BOOKMARK Dr. Roberts home page, as President Reagan appointed Dr. Roberts Assistant Secretary of the Treasury for Economic Policy, not to mention his time as associate editor and columnist for The Wall Street Journal.

Dr Roberts “has” the credibility to back such strong opinions.

Me I’m just a gorilla.

Why the Reserve Currency Status Actually Matters for Your Trading

Look, I get it. You might be wondering why some gorilla trader is getting worked up about reserve currencies when you just want to know whether EUR/USD is going up or down tomorrow. But here’s the thing – understanding the machinery behind the world’s monetary system isn’t some academic exercise. It’s the difference between trading with a blindfold on and actually seeing the bigger picture that moves these markets day after day.

When I mention wishing Bolivia had reserve status instead of the U.S., I’m not just being contrarian for the sake of it. The point is that having the world’s reserve currency creates a unique set of circumstances that directly impact every single forex trade you make. The dollar’s special status means that roughly 60% of global foreign exchange reserves are held in USD, and about 40% of global debt is denominated in dollars. This isn’t trivia – this is the foundation that everything else sits on.

The Exorbitant Privilege Problem

The French coined the term “exorbitant privilege” back in the 1960s, and it’s never been more relevant. Because the U.S. controls the world’s primary reserve currency, they get to print money and export their inflation to the rest of the world. Every time the Federal Reserve fires up the printing press, it’s not just American inflation they’re creating – it’s a global phenomenon that shows up in currency pairs across the board.

This is why you can’t ignore U.S. monetary policy even if you’re trading exotic pairs. When the dollar weakens due to expansionary Fed policy, it doesn’t just affect DXY. It ripples through everything from AUD/JPY to USD/ZAR. The carry trade mechanics, the commodity currency relationships, the safe-haven flows – they all trace back to this fundamental imbalance in the global monetary system.

And here’s what really gets under my skin: this system creates artificial demand for dollars that has nothing to do with the underlying economic fundamentals of the United States. Countries need dollars for international trade, central banks need dollars for their reserves, and emerging market companies need dollars to service their debt. This constant dollar demand props up the currency in ways that can completely distort normal market relationships.

Reading Between the Lines of Central Bank Actions

When Dr. Roberts writes about the economic distortions created by current policy, he’s highlighting something that should be front and center in your trading analysis. Central banks around the world are trapped in a system where they have to react to Fed policy whether it makes sense for their domestic economies or not. This creates predictable patterns that smart traders can exploit.

Take the Swiss National Bank’s infamous EUR/CHF peg that blew up in 2015. That wasn’t just a random policy failure – it was the inevitable result of trying to maintain an artificial currency relationship in a world where the underlying monetary foundations are constantly shifting. The SNB was essentially trying to fight the global dollar system, and physics won.

The same dynamic plays out in different ways across emerging markets. When the Fed tightens, capital flows back to the U.S., emerging market currencies get crushed, and their central banks are forced into defensive positions regardless of what their domestic economies actually need. It’s not organic price discovery – it’s a rigged game where the house always has an edge.

The Bolivia Principle

My Bolivia comment wasn’t just a throwaway line. Imagine if global trade was denominated in Bolivian bolivianos instead of dollars. First, you’d have to learn about Bolivian politics, economic policy, and social dynamics. More importantly, the global monetary system would be anchored to a much smaller, less complex economy where cause and effect relationships would be clearer and more predictable.

Instead, we’re stuck analyzing the policy decisions of a massive, financialized economy where the connection between monetary policy and real economic outcomes has been severed by decades of intervention. The U.S. can run massive deficits, print unlimited money, and maintain artificially low interest rates precisely because of this reserve currency status. It creates a feedback loop that makes fundamental analysis increasingly difficult.

This is why reading someone like Dr. Roberts matters for traders. He’s not afraid to call out the distortions and contradictions that make our job harder. When you understand that the game is rigged at a structural level, you can start to anticipate how those distortions will play out in currency markets.