Immanent Collapse of the US Dollar

"By suppressing Treasury yields, the Fed forces the exchange rate to bear the full weight of the adjustment."

"Importantly, the Fed's policy need not suppress real interest rates by more than a percent or two to create dramatic pressure on the dollar. One way to think about the price jump required by exchange rate overshooting is to think about a long-term bond. If a 10-year zero-coupon bond with a $100 face is priced to deliver 0% annually, it will have a price of $100. If investors suddenly demand the bond to be priced to deliver 2% annually, the bond must experience an immediate drop in price to $82. Once that price drop occurs, the selling pressure on the bond will abate, since it will now be expected to appreciate at a 2% annual rate."

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