Boss: The global machine

What you get asked

1. Which sequence is the classic business cycle?

   Growth broadens, overheats at the peak, contracts into recession, then heals through recovery, on no fixed timetable, which is why nobody reliably times it.

2. Boss round: match each signal to its meaning

   Four gauges from across the league: the cycle, the FX market and the bond market, all on one dashboard.

3. You invest €10,000 in a US fund. It gains 10% in dollars, but the dollar loses 10% against the euro. Roughly what is your holding worth in euros?

   €10,000 × 1.10 × 0.90 = €9,900, a small LOSS despite the fund's gain. Currency risk is real risk, which is exactly why you learned to see both legs of the trade.

4. The 2022 UK gilt crisis was triggered by:

   Roughly £45bn of unfunded cuts sent gilt yields soaring, forced pension funds into fire sales, and toppled a prime minister in 49 days. Even G7 governments borrow at the market's pleasure.

5. Emerging-market crises often repeat the same trap: income in local currency, debt in ___.

   When the local currency slides, dollar debts balloon: the pattern behind Argentina, Turkey, and half the EM crises of the last fifty years.

6. Final question. What truly links the cycle, currencies, debt and global flows?

   A hot cycle lifts rates, rates move currencies, currencies squeeze dollar debtors, fleeing capital feeds back into the cycle. You can now read the whole machine: league conquered, boss down. 🐜

The rest of this unit

Trade balances, petrodollars, and the money that flees at midnight.

• Trade balances
• Petrodollars to multipolar
• The dollar-debt trap
• When money runs