Mehreen Khan.....Why The $ Is Crashing And Why You Should Care:
So much, rightfully, is written about the out of control debts in the US and ballooning fiscal deficit. Mr Musk has departed the White House having achieved only a fraction of the savings he hoped for via DOGE and now the Big Beautiful Budget Bill is making its way through Congress. If passed, this landmark fiscal bill would add $6-7 trillion to the fiscal deficit. The $ and US Treasury mkts are reflecting the mkt's anxieties over these policies.
The $ is having its worst year since 2008, down 9%.
For the first time in 50 years, there are questions over the $'s status as the reserve currency of the world. The weakness of the $ and bond mkt post Liberation Day was a dramatic indicator of a regime shift. Foreigners sold "safety assets" as trust in those assets is now being questioned for the first time in decades.
History shows that monetary systems end. Many argue we are witnessing a pivotal moment in history, perhaps intentionally so, to structurally weaken the $ and address economic imbalances. The real question though is what takes its place? The Euro? The Renminbi? Gold? Could gold, after 50 years out in the cold, once again play some bigger role in a new monetary system? The price is certainly starting to reflect it as a possibility given the seemingly unstoppable growing debt pile and the need to inflate away debts by debasing the currency. We know the price insensitive Central Banks aren't hanging around to find out. They just keep on buying gold as repatriation away for US assets continues.
Remember JP Morgan argued recently that, conservatively, if Foreigners sold just 0.5% of their US assets and re-allocated into gold, the price could be $6,000oz.
These are massive, complex questions.
