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Dollar Wrecking Ball Confirmed: The Looming Global Currency Crisis

Hey Tiger, this is a major update. Let's dive into the growing global currency crisis because, at this rate, it seems inevitable. I'll break down all the complexities for you in simple terms.

Scott Besson, Yellen’s replacement, is facing a massive challenge. He needs to borrow enormous amounts of money but is avoiding issuing long-term U.S. bonds. Instead, he’s sticking to Yellen’s strategy of flooding the market with short-term treasuries. Why? Because he understands the harsh reality: the U.S. economy is trapped.

If Besson dares to sell more long-term bonds, yields could skyrocket, potentially collapsing the entire financial system. Investors see this risk, which is why they’re demanding higher yields to hold U.S. debt. The world knows the U.S. government will eventually default—it’s not a question of if but when.

Even as the Federal Reserve cuts interest rates, borrowing costs for the U.S. government continue to rise, especially on the 10-year bond. Who in their right mind would lend to the U.S. long-term without demanding a higher return?

The Short-Term Hurricane Tsunami

Here’s the problem: Congress won’t stop spending, and Besson must keep borrowing. To do so, he has no choice but to issue a flood of short-term bonds (1-12 month treasuries). Basic supply and demand economics dictate that when you increase supply at an extreme rate, you overwhelm demand—especially in the face of Trump’s ongoing trade war.

Besson recently confirmed what many of us have suspected: he supports a stronger U.S. dollar. In the short term, this benefits the U.S. economy, but for the rest of the world, it’s a disaster. He publicly stated that he favors a strong dollar and will not disrupt the bond market. This reaffirms America’s commitment to a strong-dollar policy.

The Consequences of a Stronger Dollar

With this in mind, we can see the storm forming on the horizon. The dark clouds are gathering, signaling a major financial shift. Besson is fully aligned with Trump’s economic policies, particularly the aggressive use of tariffs.

The U.S. is leveraging tariffs to strengthen the dollar, which will have widespread consequences. Contrary to previous claims that foreign countries would bear the cost, the reality is that American workers and small businesses will ultimately pay the price.

Economic theory suggests that a 10% tariff should lead to a 4% currency appreciation. As a result, Chinese manufacturers—who rely heavily on exports—may adjust their prices to maintain market share. However, the real issue isn't China lowering prices. The real problem is that global supply chains are deeply entrenched, making it nearly impossible to replace Chinese goods overnight. Just ask Walmart.

Why the U.S. Wants a Currency Crisis

The U.S. is intentionally strengthening the dollar because a global currency crisis serves Trump's economic restoration agenda. While a strong dollar hurts U.S. exports, the U.S. industrial base is already weakened compared to China. Instead, a strong dollar severely impacts manufacturing-based economies like the Eurozone, Japan, Canada, and Mexico.

Take Europe, for example—the euro has fallen over 5% against the dollar in just six months. This makes industrial imports more expensive, crippling European manufacturing. Similar effects are hitting Japan, Canada, and Mexico. Even China, despite its resilience, isn’t immune.

This is why manufacturing economies fear Trump’s trade war—it creates the perfect conditions for de-industrialization, with the U.S. standing to benefit.

The Fallout for Canada and Mexico

The situation is especially dire for Canada and Mexico, whose economies depend heavily on exports to the U.S. A 10% tariff alone could be enough to collapse their export-driven economies and push them into recession.

As U.S. dollar flows slow down, the strength of the dollar rises, making industrial inputs even more expensive for U.S. trade partners while making imports cheaper for the U.S. This dynamic is part of the broader economic strategy at play.

The Debt Hurricane That Will Doom the U.S. Economy

Trump’s strong-dollar policy is a short-term win but a long-term disaster. His tax cuts alone are projected to create a revenue shortfall of over $10 trillion, possibly reaching $11.2 trillion. This would drive the U.S. debt-to-GDP ratio to unprecedented levels—potentially 132% by 2035 on the low end and nearly 150% on the high end.

The additional interest costs alone could amount to $2.7 trillion over the next decade, meaning Besson would need to borrow an extra $270 billion annually just to keep the system afloat.

How long can the strong dollar last? No one knows for sure. The U.S. may continue this strategy until Europe is fully de-industrialized and manufacturing shifts back to America. At that point, Trump could intentionally weaken the dollar to boost U.S. exports. But other nations aren’t going to sit idly by and wait for this to unfold.

How China is Responding—Dumping USD for Gold

China has been actively decoupling from the U.S. dollar system by shifting its reserves into gold. Despite record-high gold prices, China’s central bank continues expanding its holdings, recently adding another 160,000 ounces, bringing its total reserves to nearly 73.5 million ounces.

This makes perfect sense from China’s perspective. If Trump follows Biden’s precedent, foreign U.S. assets could be frozen or seized. So, China is taking no chances.

Looking at the numbers, China’s gold reserves used to be less than 3% of its total foreign exchange holdings. In just five years, that has grown to 5.5%—a massive increase. And these are just the official numbers; the real figures are likely much higher.

But it’s not just China—other BRICS nations are also stockpiling gold. They fear sanctions and the continued debasement of the U.S. dollar.

Russia’s Gold Boom

G7 sanctions have pushed Russians to seek alternative ways to store their wealth. In the past, many Russians held assets in U.S. dollars and euros, often kept overseas. But with growing risks of asset seizures, Russians are turning to gold.

Russian consumers bought 75.6 tons of gold last year, ranking fifth globally. Despite high gold prices, demand has increased by 6%, signaling strong buying momentum. Meanwhile, Russia's economy is expected to grow by at least 2.5% annually through 2027, meaning its citizens will continue investing in gold.

The Escalating Trade War and Global De-Dollarization

Besson is convinced that tariffs are good for the U.S. economy. While some argue that tariffs drive inflation, he remains unconcerned, claiming that deregulation and other policies will balance things out.

But the real risk isn’t just inflation—it’s global economic destabilization. A universal tariff could range from 5% to 25%, but whatever the final figure, it will wreak havoc on international trade and currency markets.

Countries may retaliate with counter-tariffs, but the bigger threat lies in the long-term consequences: de-dollarization. If the U.S. dollar strengthens too much, nations may start selling their dollar assets. The critical question then becomes—will they continue buying U.S. bonds at the same rate, or will they turn to alternatives like gold?

Final Thoughts

Why is the U.S. pushing for a stronger dollar, and will BRICS nations continue increasing their gold reserves? Let me know your thoughts in the comments below. Stay safe, and don’t forget to like and subscribe.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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