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Here’s the playbook if the rest of the world breaks free from the U.S. dollar, says Credit Suisse’s monetary plumbing guru


It’s pretty well accepted that no one knows as much about the plumbing of the world’s financial system as Zoltan Pozsar, global head of short-term interest-rate strategy at Credit Suisse, who was the point person on market developments for senior U.S. officials during the 2008 global financial crisis and has mapped out the shadow banking system. The mechanics of the financial system are the type of thing you don’t really have to think about, until you do, when there’s a breakdown.

The issue is, it’s been breaking a lot — by Pozsar’s telling, three times since 1997, most recently in 2019, when the Federal Reserve briefly lost control of the overnight interest-rate market. And Pozsar, as well as other experts, thinks the U.S. sanctions on Russia mark a momentous shift since the largest commodity producer in the world has been put in the penalty box.

Also read: Russian commodities today are like subprime CDOs were in 2008, says rates strategist

The Treasury’s Office of Foreign Assets Control, he says, is far more powerful than either the Federal Open Market Committee or the Financial Stability Oversight Council at the moment. “The state does what the state does, and the FOMC will have to clean up the inflation that comes next,” he says.

Without price stability, there is no exorbitant privilege or dollar supremacy, says Pozsar. He says it’s rational to ponder whether China will revalue the renminbi

versus the dollar, and whether Saudi Arabia and Hong Kong will abandon their pegs. “After all, if [former Treasury Secretary] Larry Summers is right and the Fed will be forced to hike to close to 5%, and if we are right about the relative decline of the FX value of the U.S. dollar, why would anyone shadow the U.S. hiking cycle and crush domestic housing and suffer a spike in living costs due to a peg that no longer makes any sense,” he asks.

Money, he adds, can’t buy commodities in times of shortages. “But, countries can choose to revalue their currencies if they’ve been suppressing their value, or rethink their FX pegs with an eye to maximize the commodities they can buy in a world of shortages,” he says.

What’s his playbook? If you can’t use quantitative tightening or hike your way out of inflation, then some decline of the U.S. dollar is inevitable, “and shorting U.S. rates, the U.S. dollar, and some FX pegs makes logical sense,” he says.

It should be noted that the U.S. dollar

hasn’t, despite its critics, struggled during the Russian invasion of Ukraine, and on Tuesday reached its highest level versus the euro

in more than a year. An expert plumber doesn’t necessarily know how to build a house.

The buzz

Happy earnings season — first-quarter results were released from JPMorgan Chase
Delta Air Lines

and BlackRock

among others. Delta shares rallied after stronger-than-forecast revenue, pulling up rival carriers including American Airlines
while JPMorgan results fell short of estimates.

Producer prices jumped 1.4% in March, faster than forecast, the Labor Department reported. The U.K. reported the highest inflation rate in three decades. New Zealand’s central bank raised interest rates by a half point in a surprise to the market, while the Bank of Canada also is expected to lift rates by a half point.

A Twitter

shareholder is suing Elon Musk, claiming he and others suffered financial losses because of the billionaire’s delay in disclosing his stake in the social-media company.

The markets

U.S. stock futures


flattened out after early gains. The S&P 500

closed lower Tuesday for the fifth time in six sessions.

The yield on the 10-year Treasury

was 2.75%.

Top tickers

Here were the most active stock-market ticker symbols as of 6 a.m. Eastern.


Security name






AMC Entertainment










Mullen Automotive


Digital World Acquisition Co.



Random reads

Anheuser Busch

and Major League Baseball will add recycling hawkers to the stands.

Speaking of baseball, coach Alyssa Nakken became the first woman to make an on-field MLB appearance.

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