To understand global markets, you must first understand one inescapable fact: the US dollar is the center of the financial universe. This isn't American exceptionalism — it's plumbing.

The Numbers That Matter:

• ~60% of global foreign exchange reserves (EXCHANGE_RESERVES) are held in dollars
• ~60% of international trade is invoiced in dollars
• ~60% of international debt is denominated in dollars
• The vast majority of commodity markets price in dollars

This creates a profound asymmetry: when the Fed tightens policy, it's not just tightening for America — it's tightening for the entire world. A Turkish company that borrowed in dollars now faces higher debt servicing costs. A Brazilian exporter earning dollars now gets fewer reais when converting. A Korean manufacturer importing oil pays more.

Dollar Shortage = Global Crisis:

When dollars become scarce globally (Fed tightening, flight to safety), a cascade begins:

1. Emerging markets struggle to service dollar debt
2. Their currencies weaken vs. dollar (vicious cycle — need more local currency to buy fewer dollars)
3. Capital flees to dollar safety
4. Dollar strengthens further
5. More EM stress

This is the 'dollar wrecking ball' — and it can devastate emerging markets even when their domestic fundamentals are fine.

The Key Insight:

The Fed is the world's central bank, whether it wants to be or not. Its domestic mandate (US employment and inflation) often conflicts with global financial stability. When the Fed fights US inflation by hiking rates, it exports tightening to the entire world through dollar strength.