Last time, I successfully predicted the crisis of U.S. Treasury bonds before the triple threat of stocks, bonds, and exchange rates. By the way, I admire @realBillZhang for spotting the mistake at a glance.

It should be the stock market < bond market, because by the time I realized it, the editing time had passed, so I pretended not to see it. It seems one really can't just go with the flow 🐒

Although everyone's sentiment towards tariffs has shown diminishing marginal effects, the issues they raise are steadfast. These include, but are not limited to, economic recession, stagflation, and the continued weakening of the dollar.

Now that it's come to today, I will approach it from the perspective of the dollar, explaining why I believe the foundation of the global economy has developed cracks (a crisis of trust) and whether the dollar's status will collapse.

Since the end of the gold standard with the 'Nixon Shock' in 1971, the dollar's status as the global reserve currency seems unshakeable. However, in 2025, a series of radical policies after the Trump administration took office:

→ High tariffs + a tough stance towards allies → Investors are reevaluating the future of the dollar, leading to a crisis of trust.

* The dollar index (DXY) has fallen by 8.2% in just a few months, causing market concerns.

◆ The dollar's 'super privilege'

The global dominance of the dollar stems from its core role in trade, finance, and foreign exchange markets. According to the International Monetary Fund, 57% of global foreign exchange reserves are denominated in dollars, 54% of export invoices, 60% of international loans, and 88% of foreign exchange transactions involve the dollar. This demand gives the U.S. the ability to borrow at low costs.

This also leads to the fact that even though the U.S. economy accounts for only a quarter of the global economy, the dollar's position remains solid, partly because potential alternative currencies like the euro and renminbi are difficult to replace the dollar due to political or policy restrictions.

◆ The 'Trump' shock

The radical tariff plan of the Trump administration (partially suspended) has led to severe fluctuations in the financial market, causing the dollar to significantly weaken against safe-haven currencies like the Swiss franc and the yen, as well as gold. The DXY index recorded the seventh largest weekly decline in nearly 30 years in April 2025. Even more concerning is the ambiguous attitude within the government regarding the dollar's reserve status; some officials believe that the overvaluation of the dollar harms U.S. export competitiveness, while the chairman of the Council of Economic Advisers, Stephen Moore, publicly criticized the demand for dollars as distorting the market, highlighting significant policy uncertainty and internal divisions, which in turn deepens external worries about the dollar.

◆ Short-term and long-term challenges for the dollar

In the short term, the dollar faces sustained depreciation pressure. Foreign investors hold $31 trillion in U.S. assets; if confidence wavers, a reduction will exacerbate the dollar's decline. Goldman Sachs predicts that over the next 12 months, the dollar will fall by another 6% against the euro and the yen.

In the long term, although the dollar's reserve status is temporarily secure due to inertia and lack of alternatives, the policies of the Trump administration are eroding global trust. Threats include the independence of the Federal Reserve, capital controls, and even a withdrawal from the International Monetary Fund. These signs themselves indicate that the 'trust foundation' of the dollar is weakening.

◆ The possibility of de-dollarization

Although 'de-dollarization' has been widely discussed, there are indeed limited alternatives to the dollar in reality. The euro is constrained by internal coordination issues within the EU, the renminbi is difficult to exchange freely due to capital controls, and the scales of the yen and Swiss franc are too small.

I would like to quote Mark Sobel from the financial think tank OMFIF: "The dollar will still be the 'only fitting shirt'." Of course, the overvaluation of the dollar and the widening U.S. trade deficit may drive other countries to seek diversified reserve assets, gradually weakening the absolute dominance of the dollar.

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In summary

The dollar's hegemony faces the most severe test in half a century; the policies of the Trump administration have not only triggered market turmoil but also shaken global confidence in the U.S. as the cornerstone of the global financial economy.

As banker Walter Wriston said, "Capital flows to where it is welcomed." If the United States cannot rebuild global trust, the dollar's 'super privilege' may gradually fade, leading to new uncertainties in the global financial system.

Personally, I believe that the reserve status of the dollar is unlikely to be replaced in the short term. As retail/general investors, there is no need to worry about this. On the contrary, if it is institutions/professional investors holding a large amount of dollars, they may need to 'balance their funds', as the decline in the dollar's value and influence has become a reality.

As the old saying goes: A flower does not bloom for a hundred days.