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THE WORLD IS STUCK WITH THE U.S. DOLLAR…

Could the dollar be at its financial end? Or is this the wish of those who feel financially trapped by its dominance? There is approximately 12.36 trillion dollars in foreign global reserves, of which China is the biggest holder of U.S dollars in their reserves.

The dollar doesn’t just play a dominant role in trade, but it also allows countries to stabilize their currencies by buying and selling U.S. dollars on the Forex exchange.

Displacing the dollar's dominance means doing away with 81 years of financial infrastructure. China's 18 trillion dollars doesn’t necessarily make the Yuan the obvious candidate to replace the U.S. Dollar.

There are a few barriers that make it impossible for the Yuan to be a candidate for a reserve currency. First, their Yuan is highly restrictive; China controls how money moves in and out of the country.

A reserve currency must be easily and freely tradable; this is not the case with the Chinese Yuan. China limits financial participation by foreign investors; therefore, it lacks the liquidity necessary to be considered a reserve currency.

And perhaps the biggest nail in the coffin to the Yuan's consideration is China’s authoritarian leadership and lack of legal protections.

Now, throw into the mix as a qualifier a trusted stable economy, and considering China is in the middle of a real estate crisis, as well as it is suffering from deflation along with a huge political risk—this disqualifies the Yuan as a reserve currency.

The most likely candidate to replace the U.S. dollar would be the EU, which has a GDP of 20 trillion.

The major drawback is the lack of safe assets. As compared to the 36.2 trillion dollars in U.S. treasuries, the eurozone’s equivalent is approximately 12.2 trillion euro bonds, which hardly provides enough liquidity to facilitate world trade.

The Eurozone consists of multiple countries without one accord, each having a different agenda, which makes implementing policy very challenging. The Eurozone lacks a unified banking system and adoption, making its financial system less resilient and fragmented compared to the U.S.

At best, the Euro is a great second-place option, but in terms of liquidity and economic stability—size matters, so for now, the world is stuck with the U.S. dollar.

And for those who think the BRICS nations will create a currency that will supersede the U.S. dollar, please read from top to bottom; you need trust, liquidity, stability, worldwide adoption, and a unified financial system.

At best the BRICS nations represent a den of thieves where no one trusts anyone to work as a unified front let alone China, and China will not relinquish manipulative control over their currency to allow it to trade freely.

Brazil declined the acceptance of a BRICS currency and prefers the resiliency of the reliable U.S. dollar.

And the argument of backing their currency with gold, well, it didn’t work with the U.S., and it will not work with the BRICS for different reasons.

First of all, BRICS only have 20% of the world’s gold as compared to the G7, which owns nearly half of the world’s gold. This prevents the BRICS from fully backing their currency with gold.

Backing a currency with gold requires deep coordination on monetary policy, reserve management, and trust among member states—something BRICS nations have struggled with due to differing economic priorities and political tensions.

So, in essence to accomplish this it would have to be a marriage of wills and alignment of interests, but the issue is that each country has its own agenda. The last obstacle to its execution is Trump’s threat of 100% tariffs, if any of the BRICS countries attempt to pursue the currency to challenge the dollars dominance.

So, it’s very unlikely that BRICS will be anything more than a pipe dream fueled by delusions of grandeur.

WHEN INVESTING BECOMES A LIFESTYLE, YOU WEAR IT!

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ARE WE JUST SHEEP WAITING TO BE BOUGHT AND SOLD?…

The financial markets are much bigger than buy or sell. It is the life source to the economic powerhouse we call the United States.

The framework that overlaps the thought process of the American financial perspective is one of ego, as we are the largest economy in the world, as well as ignorance, because financial independence or literacy is not a prerequisite in the early stages of life.

In an ironic juxtaposition, we are a capitalistic country that thrives on the ignorance of the proletariat worker.

Those bold enough to scratch the entrepreneurial surface pierce the veil of opportunity, and those who decide to skate within the confines of the dotted line go as far as the status quo. It’s as if once the forefathers realized the opportunity to control the masses through media, the law, and systematic repetition, America became a corporation, and people quickly went from being human beings with free will to livestock with a projected value based on life expectancy.

People have been reduced to a data point on a chart, tracked by key performance indicators (KPIs).

For example, Facebook may be free, but its business vertical makes us the product. They say the average person who logs into Facebook is worth approximately $200 to Facebook.

Facebook makes its money through advertising based on data. Facebook is merely an example of what we’ve become based on our desire to build community, while others build businesses.

But if you look at the word desire, a strong feeling of wanting to have something or wishing for something to happen, this is a maker's Disneyland. Desires create strong emotional connections that drive a purchase decision.

The trick is to get you to yearn for or think you need a service or product under the slogan that your life would be so much better with their products versus without.

If you go a layer deep, your feelings are extracted, repackaged, and sold back to you in a manipulative fashion based on general beliefs that are proliferated and pushed through the media cycle, meant to trigger the very seed they implanted to grow fruit when useful.

We see this in religion, politics, the educational system, and the way we navigate through the work environment, often led by greed or financial benefit. If they can get you to feel the way they want about a decision that impacts your life, the work is done. It simply becomes the stroke of the pen.

Think about the transition from pension plans to 401(k)s. Jimmy Carter signed the Revenue Act of 1978 into law. The intention of the act was to clarify the tax treatment of deferred compensation. It was never intended to create a new retirement system.

It was Ted Brenna’s creative brainchild to use the 401(k) as a tax-advantaged retirement savings account for employees.

The 401(k) began to see widespread adoption for the simple fact that it took the burden and risk of retirement from the corporation and placed it squarely on the balance sheets of the American public.

The American public never knew what hit them because major companies like Johnson & Johnson, PepsiCo, and JCPenney quickly adopted it in 1982, and most corporations began to follow suit.

Mutual funds and investment houses like Fidelity began pushing the 40l(k) and emphasizing its tax advantages, sold as a way for their employees to control retirement. The real nature of the manipulation was to remove the burden from the corporate balance sheets and place it into the hands of a public that had no true financial literacy, therefore insuring they would be working well into their extended years making it a win-win for corporations and a lose-lose for the retirement age senior that are unable to retire.

If this is freedom, then what is slavery?

America has entered into a battle of invisible classism where those with the information and the resources cage those without, and the opportunity to rise above the system of wants and needs only belongs to those who can build businesses that serve those needs and wants.

We’ve become a consumer-driven economy where consumers drive 70% of the consumption, the top 10% of households (by income or wealth) control 50% of the spending, and 90% of households control a much smaller share of wealth, and their spending is stagnating or declining.

The top 10% (households earning $250,000+) have seen their share of consumer spending rise from about 36% in the 1990s to nearly 50% today. But what about the 90%? These are the folks who are making on average $62,000 a year. They can barely breathe in today’s economy.

The majority of these folks bought into the American dream where one job should be sufficient to build the desired life for them and their lifestyle.

ABC News polls suggest that only 27% of Americans are aligning with the dream.

How’s that for consumer sentiment?

This explains why there is such a huge disconnect between those who are trapped in the economy (Main Street) and those who profit from the economy (Wall Street) and big businesses.

The balance of power is as lopsided as the Magnificent 7, and unless those in the system feel empowered by the system, the future of the system is at risk.

After all, no one wants to feel like a commodity that has been bought and sold in the economic exchange of life.

 WHEN INVESTING BECOMES A LIFESTYLE, YOU WEAR IT!

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THE IDEAL OF AMERICA IS BURNING…

The United States treasury bond market is a future-telling mechanism that often signals market tailwinds or headwinds, and right now, the red light is blinking. Rising treasury yields have sounded the alarm that the world has put the United States on notice.

Yields as of April 12 were at 4.497%.

Rising yields present a unique problem for the stock market and the U.S. economy and could potentially threaten the United States' financial position in the world markets.

Here’s how.

We are experiencing the trifecta of dire consequences: a falling dollar, rising yields, and a spiraling U.S stock market.

Rising yields mean there could be major bond sellers in the marketplace that could be experiencing massive margin calls, and although highly unlikely, countries could be dumping treasuries.

It is more likely that hedge funds are suffering from collateral damage due to being on the wrong side of a failed basis trade or the highly levered 10-year Treasury futures.

According to Bis.org, the maximum leverage allowed on treasury futures contracts can be 50:1 to 70:1.

The contract size of a 10-year treasury is 100,000.00, which means the margin requirement is 3% or $3,000. The margin of error is very small, and while treasuries usually present safety, any huge moves can have a catastrophic effect.

Last week's enormous market surge could have exposed a major crack not just in the treasury markets, but in the entire tariff complex.

A weak dollar threatens the United States' reserve currency positions, which could lead countries to sell treasuries and dollars, then seek currency alternatives, further weakening the U.S dollar.

The selling pressure in the bond markets will not just drive up yields but could shake the entire banking industry, potentially causing a credit crunch.

If the lack of confidence in the U.S. stock market is accelerated by a major bond sell-off this could trigger a tightening of credit as rising yields spell potential losses for banks holding treasuries.

And because the bond market is bigger than the stock market, the compounding effect could be catastrophic.

When looking at the falling dollar, one can’t help but think that there is a sell America trade happening—meaning…countries are selling their dollars flooding the market and taking their currency home.

A minority seller will not cripple the dollar, but what if countries band together to strategically weaken the dollar, therefore damaging its reserve currency status? The combination of a weak dollar and rising yields may be too much pressure for the Trump administration to continue its protectionist policies.

Rising yields are counterproductive to their plan to lower inflation and get the Fed fund rate low enough to refinance the 9.2 trillion coming due this year. Plus, it’s going to be extremely hard to sell a tax reduction if it’s going to pack trillions of dollars onto the deficit.

Cuts by DOGE are minuscule as compared to what is needed, and if the objective is to burn it all down and start over, this could severely undermine not only the dollar’s position as a reserve currency but our position in the geopolitical system, losing more than we ever could gain.

They say history doesn’t repeat itself, it rhymes, and this is reminiscent of the Smoot-Hawley Tariff Act of 1930. President Herbert Hoover signed the act meant to protect American businesses and farmers from foreign competition during the onset of the Great Depression.

Sponsored by Senator Reed Smoot and Representative Willis Hawley, the act raised tariffs on over 20,000 imported goods, increasing average import duties from 40% to nearly 60% for some products.

This was a classic example of special interest winning over pure common sense as lobbyists overpowered the veto of over 1,000 economists passing narrowly in the Senate. When you look at the mirror image of what happened back then, as to what can happen now it doesn’t look great.

Tariffs caused our trading partners, Canada, France and Argentina to retaliate, and we saw a 32% drop in world trade contributing to the Great Depression and in hindsight was the most disastrous, disruptive economic policy in history.

This explains why Gold is in play because typically when the stock market is in a decline, investors flock to the safety of the U.S. treasuries. After all, it is backed by the full faith of the U.S government.

But what happens when investors and our trading partners lose faith in the U.S, its dollar, and its government policy—and no longer believe in the economic stability of America as a country? They buy gold, which could be the first sign that America and its idealogies are burning. 

 WHEN INVESTING BECOMES A LIFESTYLE, YOU WEAR IT!

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Kevin Davis Founder of Investment Dojo and Author of The C.R.E.A.M. Report