Tom Bilyeu

Investors who are comfortable holding unhedged dollar assets because the dollar looked weak suddenly need to scramble.

The whole market reprices at once.

The researchers describe it as something like an amplifier effect.

The same dollar move produces a much bigger shock to the funding system when it comes from a low dollar starting point.

Here's what should get your attention.

For most of the period leading up to the Iran war, the dollar was in a low dollar regime.

It has been weakening for months.

The market had oriented itself around that.

And then the Iran war hits and the dollar surges.

Exactly the kind of sudden transition from low to high that the paper identifies as maximally disruptive, which means the cross-currency basis tightening we've already been seeing, it's being amplified.

The commodity liquidations we watched play out over three consecutive days, amplified.

The dollar funding squeeze that Asian importers are expecting right now, amplified.

The stress on the surface is real, but the stress underneath the surface is likely worse than the surface numbers suggest.

Think of it like an earthquake.

The magnitude on the seismograph is what it is.

But if the earthquake hits ground that's already saturated from reeks of rain, the damage is far greater than the magnitude alone would predict.

The ground gives way in ways it otherwise wouldn't.

This is the situation right now.

An already saturated system hit by a sudden dollar surge in the exact regime transition that researchers now tell us produces the most violent response.

And here is the thing that binds all four of these parts together.