The Dollar Faces a Wile E. Coyote Moment, Economist Warns
The U.S. dollar could soon face a gravity-defying fall — much like Wile E. Coyote running off a cliff — according to Savvas Savouri, managing director at London-based economic advisory firm QuantMetriks.
Savouri argues that stagflation is looming in the U.S., and the signs are clear if you “look through the front windshield rather than the rearview mirror.” With a background spanning academia, major investment banks, and a long tenure at Tosca Capital, Savouri has no shortage of strong and direct economic views.
His forecast is blunt: inflation will rise, the dollar will fall, and the U.S. Treasury yield curve will steepen.
Three Forces Driving U.S. Inflation
Savouri identifies three inflationary drivers:
- A weakening dollar, which makes imports more expensive
- A shortage of cheap migrant labor, pushing wages and costs higher
- Higher tariffs, which he says are inherently inflationary, even if their impact hasn’t shown up in the data yet
He dismisses the idea that tariffs can be benign, arguing they will only stoke inflation — particularly those tied to Trump’s policies, including reshoring manufacturing and recent spending packages like the “One Big Beautiful Bill Act,” which he sees as equivalent to money-printing.
The Fed vs. The White House
In a note titled “The Inflationator vs The Powell,” Savouri suggests Fed Chair Jerome Powell may not last until his scheduled 2026 departure, predicting political pressure could cut his tenure short — as has happened to central bank leaders in Japan and Turkey.
“If the dollar falls and inflation accelerates while the Fed cuts rates,” he says, “then long-term yields will rise much faster than short-term ones” — steepening the Treasury curve dramatically.
Bearish on the Buck
Savouri is deeply bearish on the dollar, describing it as heading toward a “Wile E. Coyote moment” of suspended disbelief before a hard fall. He believes Trump would welcome a weaker dollar and even speculates that a future Trump-Xi meeting could lead to China allowing the renminbi to appreciate — potentially breaking the Hong Kong dollar peg in the process.
He also questions who would want to hold long-term U.S. debt during a trade war with the very nations that traditionally buy it.
How to Invest Amid the Fallout
Savouri suggests investors shield themselves with TIPS — Treasury Inflation-Protected Securities — which rise with inflation. He also sees upside in certain stocks, especially large-cap and big tech firms that can pass on higher costs and have global revenue exposure.
However, small and mid-cap U.S.-only companies with weak balance sheets, particularly those dependent on refinancing short-term debt, may be hit hard.
As for alternatives, Savouri dismisses cryptocurrencies as risky and destabilizing, but endorses gold as a hedge and sees the Australian dollar as the top foreign currency play, citing the country’s strong demographics and economic fundamentals.
