James Stephenson
Tesla Investor
The US dollar will be sacrificed to grow the economy, as Treasury Secretary Bessent says the only way out of debt is to grow out of it. With debt at 121%, policymakers see one path forward, inflation and GDP growth, which makes savers losers like never before and argues for holding savings in assets that hedge inflation. The dollar's destruction began in 1970 and won't stop anytime soon, though it is not expected to fall within our lifetime. x.com x.com x.comÂ
The US dollar faces debasement because papering over the debt burden requires destroying its purchasing power to reduce debt-to-GDP. With no new buyer for US debt, bond rates will keep climbing: debt is $40 trillion versus $5 trillion in 2007, with a $2 trillion annual deficit and debt at 123% of GDP. Getting rates back to 2.5% would require a complete financial reset that destroys the dollar and inflates debt away; otherwise rates will climb to 6-9% in the short to medium term. x.com x.comÂ
The US dollar remains an easy long as the Fed turns hawkish, since the only way to control prices now is on the demand side, and that means rates go up. Kashkari's latest comments raise the question of whether the Fed has learned its lesson or is drifting toward Team Transitory 2.0. x.comÂ
The US dollar looks set for a multi-year bear cycle because a multipolar world needs fewer dollars. Reserve managers are diversifying, trade settles in more currencies and central banks accumulate gold instead. Against an equally weighted basket, the dollar's half-century sequence of lower secular highs is topping again on its 7-to-10-year cycle. Every major commodity bull of the past century ran alongside a falling dollar, which could also bring a second inflation wave. x.comÂ
Potential spending cuts and AI-related deflation make long-dated US Treasuries an asymmetric opportunity. A Democratic sweep could cut spending; an AI-trade blowup could cause deflation, while the AI trade hurts employment. Ending the Iran war could reduce spending and oil prices. Further crude gains could damage the economy hard and quickly enough to outweigh the inflation threat. x.com x.comÂ
The US dollar should strengthen over the long term as the US makes other countries reliant on its oil, a strategy that is working. The US is exporting more oil than it has in a long time. The bond move reflects rising energy prices, not a weak US economy, which is not actually that bad off. x.comÂ
The US dollar should weaken because the US government wants a weaker dollar to increase manufacturing competitiveness and relieve global stress from a strong dollar. x.comÂ
The US dollar is overvalued and weakening as Asian surplus countries stop recycling their surpluses into dollar reserves, an external drain. Without that recycling, both yields and the currency are in price discovery. Ken Rogoff concluded that Asia not recycling would mean a lower dollar against Asian surplus currencies and higher nominal rates, both now happening. Per @DrDavidKass, Ed Yardeni blames the global bond rout on the yen-carry unwind; the explanations are not mutually exclusive. x.com … Show more
The US dollar will keep dominating until another nation becomes a world power. @CryptoTeca__ notes that 98-99% of the roughly $310-315B stablecoin market is dollar-denominated. x.comÂ
The government never stops printing money, keeping the US stock market rising. x.comÂ