Raoul Pal: “Everyone needs and wants a weaker dollar to service their dollar debts. No one wants it to move too fast ( it blows up VAR) but they need it lower over next 12 months. This is the purest form of global liquidity and is the largest driver of global M2 currently. The US knows this too and is a key part of trade negotiations, especially with China.”
Raoul Pal highlights the global need for a weaker U.S. dollar to ease the burden of dollar-denominated debts, as many countries and entities struggle to service these loans with a strong dollar, which increases repayment costs in local currencies.
A controlled dollar decline is crucial to avoid disrupting Value-at-Risk (VAR) models, which measure market risk; a rapid drop could trigger financial instability by exceeding risk thresholds, as seen in historical currency shocks like the 1997 Asian Financial Crisis.
Pal notes this aligns with U.S.-China trade negotiations, where a weaker dollar could boost global liquidity (measured by M2 money supply), supporting risk assets like stocks and Bitcoin, which his data shows correlate 97% and 87% with liquidity cycles, respectively.
