AEP: Dollar hegemony keeps rising (& BOXES-IN THE FED)

This has profound implications for monetary policy. The Fed has become the world's central bank whether it likes it or not, setting borrowing costs for much of the global system.

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Mr Jen said trade globalisation is creating a multi-polar economy with many rising stars but financial globalisation is pulling in the opposite direction. "It is a very unstable system. The Fed is way too powerful, and it is scared of its own power," he said.

The Fed discovered to its horror with the first ‘taper tantrum' in 2013 that mere hints of a rate rise could cause the global markets to seize up, in an experience repeated episodically ever since, with a fresh rout earlier this year after the first actual rate rise in December.

The Fed has backed off each time, afraid of its international shadow. "They won't dare hit the brakes. They are trapped," he said.