Rough Waters Ahead For The US Dollar Today

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A “paradigm,” as defined by Ray Dalio, is a period of time during which “Markets and market relationships operate in a certain way that most people adapt to and eventually extrapolate.” A “paradigm shift” occurs when those relationships are overdone, resulting in “markets that operate more opposite than similar to how they operated during the prior paradigm.”

Prior to 2008, there were four such paradigm shifts, each identified by a material change in the Federal Reserve Board’s monetary policy framework in response to unsustainable debt growth. In 2008, we saw the fifth and most recent paradigm shift, when former Fed Chair Ben Bernanke introduced quantitative easing (QE) in response to the Great Recession. Since then, the Fed has been operating in uncharted territory, launching multiple rounds of an already unconventional monetary policy with detrimental outcomes.

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