Listen up, my dear friends, for the tale of the mighty dollar and its curious journey into the land of the weak. Macroeconomics wizard Raoul Pal, a former Goldman Sachs exec with a knack for predicting the unpredictable, has a story to tell. And oh, what a story it is! 🎉
In a recent video that has captured the attention of his 242,000 YouTube followers, Pal suggests that if the US dollar index (DXY) continues its downward spiral, we might just witness a grand spectacle of risk assets going wild. Imagine a world where stocks and crypto dance to the tune of a weakening dollar, and you might just get a glimpse of what’s to come.
“When the business cycle picks up, there’s more disposable income and businesses have more investment income, and that gets driven out of the risk curve always… And I think the inverse to the business cycle being so low for so long will be the flip side of the cycle will be longer than people expected because we’ve got this slight dislocation still working through post-Covid that then extends the business cycle… But if financial conditions keep moving, if they really have done some sort of Mar-a-Lago Accord, and they get the dollar [DXY] below 90. Okay, then we’re going on further and yeah, maybe it’s a full bubble cycle then.”
The DXY, a magical number that measures the value of the dollar against a basket of six other leading currencies from major economies, is currently floating at 98. But don’t let that fool you, for the dollar’s journey is far from over.
Pal, ever the optimist, adds that an increase in global liquidity could be the secret sauce that sends asset prices soaring. With government debt levels at an all-time high, the need to roll the debt might just be the catalyst that drives assets up, up, and away! 🚀
“Just using the liquidity framework, the business cycle framework, the financial conditions framework, it’s all suggesting that the probability is because they need to roll the debt, they’re going to have to increase more liquidity, and this is just going to drive assets up strongly.”
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2025-07-15 20:06