The underlying logic of the global economic operation

The US dollar, as the global reserve currency, has a unique cyclical mechanism. The United States continuously prints US dollars, leveraging its reserve currency status to transmit inflationary pressures worldwide. These dollars are used to purchase cheap goods from China, maintaining affordable and abundant domestic consumption.

China, in turn, recycles these inflowing US dollars by purchasing large amounts of US Treasury bonds. This reverse flow maintains the balance of the entire system. China's holdings of US Treasuries and dollar reserves ensure the relative stability of US financing costs, while also supporting the continued role of the dollar as the global transaction medium.

This self-reinforcing cycle has operated quite smoothly over the past few decades—dollar appreciation, cheap goods, stable Treasuries—forming a tight feedback loop. The dollar's dominant position allows the US to influence global capital flows through monetary policy, while other economies occupy their respective roles within this system. Understanding this framework is crucial for grasping global capital movements and commodity price fluctuations.