The Dollar's doing great - or is it?
Are we witnessing a monetary paradigm shift on the scale of the end of Bretton Woods—once again imposed unilaterally, as Nixon did in 1971?
The final verdict is in: anyone who still thinks the health of an economy can be measured by rising stock market indices has understood nothing about life—and, by extension, nothing about economics. When bond prices fall, stock prices rise, and vice versa. When both stocks and bonds fall at the same time, you’re barreling straight toward a market crash. That’s exactly what almost happened last year when Donald Trump unleashed his blanket barrage of tariffs—and it’s precisely what forced him to slam on the brakes.
Over the past year, the dollar has shed 11% of its value on the foreign exchange markets. If, last year, you, a foreign player, had $10,000 invested in U.S. Treasury or corporate debt, you’ve effectively watched $1,100 evaporate. So who, exactly, is still buying American debt? Mostly Americans themselves: nearly 68–70% of it is now held by U.S. financial institutions—the Federal Reserve included. In other words, Washington is increasingly lending money to itself and pretending this is normal.
Donald Trump then tossed an extra $3.4 trillion of deficit—interest excluded—onto the table with last year’s Big Beautiful Bill. Translation: more debt, no funding plan, and zero restraint. The trap has now snapped shut. The United States is incapable of repaying the $38.57 trillion principal of its debt, whose interest alone costs $3.3 billion every single day.
To service that debt, there aren’t countless options. There are four—and only four (the first three can, of course, be mixed):
Raise taxes — politically unthinkable for the current administration.
Slash public spending — wildly unpopular, as Elon Musk’s brief and abortive DOGE escapade helpfully demonstrated.
Fire up the printing press — and flirt openly with inflation spiraling out of control.
Default on the debt — which would be the death certificate of the dollar.
So the Trump administration has opted for what can politely be called a “controlled devaluation” of the dollar. How controlled it will remain is anyone’s guess, hence the escalating tensions with Jerome Powell, Chairman of the Federal Reserve, who is set to leave in May. His replacement? Kevin Warsh, whose nomination Trump announced on January 30.
Warsh is widely regarded as an inflation hawk and a hardline conservative, openly hostile to quantitative easing. Yet even he has recently softened his tone, calling for faster interest-rate cuts—a rhetorical pivot that supposedly “reassured” the markets. The proof, we are told? The sudden plunge in gold and silver prices, the ultimate safe havens.
Warsh must still survive Senate confirmation—a minor ordeal at the best of times, made more delicate by his name surfacing in the Epstein files.
On January 30, paper gold and paper silver prices collapsed. Spot and options markets saw gold drop 9% and 12%, while silver cratered 27% and 36%. For silver, this was the largest single-day drop since 1980.
So, is everything for the best in the best of all possible worlds? Not quite.
This crash in paper gold and silver was largely engineered within organized markets—COMEX futures, LBMA/COMEX spot markets—where liquidity is high and leverage is king. These markets are stacked with speculative positions, razor-thin margins, and massive short exposure. The violence of the move is easily explained: profit-taking after a speculative pile-up, followed by cascading forced margin calls.
