1. The self-dissolution of US dollar hegemony: the critical moment when hegemony costs exceed dividends
After Trump took office, I believe few people in the cryptocurrency circle liked his chaotic governance. Last night, Musk's angry criticism of Trump was simply our mouthpiece—this deserves a separate discussion later.
But if we calm down and think deeply, why can he do whatever he wants in a democratic country? The presidential system? That might be one reason, but neither the House nor the Senate, nor the American courts in recent times can control Trump’s rude behavior like a spoiled child.
Tell me why? Why!?
Trump is an asshole, but he can hijack the world's largest country because this country is willing to be hijacked by him. His chaotic governance means that the results of chaos are accepted by most Americans, except for the rednecks, and even the deep state.
Because the US ideology is shifting, from left to right, from inclusive democracy to asshole dictatorship and isolation, from globalization to self-satisfaction, from low interest rates to high interest rates, from dollar hegemony to the end of dollar hegemony.
Isn’t dollar hegemony beneficial to the US?
The current problem is that the disadvantages outweigh the advantages. Maintaining dollar hegemony makes it very hard for Americans.
Starting from the original contract established when the Bretton Woods system was founded in 1944. The premise that granted the dollar the status of 'world currency' was America's commitment to maintain gold convertibility and global economic leadership. However, when Nixon unilaterally terminated the gold standard in 1971, the dollar effectively became a credit currency maintained by military hegemony and energy pricing power. This transformation sowed the seeds of today's crisis.
The monetary backlash from the collapse of the real economy
The decline of the manufacturing sector's share of GDP from 28.3% in 1953 to 10.9% in 2023 shows an inverse movement with the level of dollar internationalization.
This development model of shifting from reality to virtuality creates a dual dilemma: on one hand, industrial outflow weakens the value anchoring of dollar credit; on the other hand, financial capital continues to push for debt monetization to maintain excess returns.
Federal Reserve data shows that the ratio of non-financial corporate debt to GDP has climbed from 45% in 1980 to 78% in 2023, revealing the depth of capital idling.
This point is probably familiar to us. But as Chinese, we may not know that the foundation of America is not wealth from financial capital, but wealth from labor. Although Trump is not without financial corruption, Americans voted for him because, overall, he is restoring the voice of industry and workers.
The political cost of the breakdown of the social contract
The polarization of wealth distribution, where 1% of the population holds 40% of the wealth, resonates with the imbalance of dollar seigniorage revenue distribution. When Wall Street gains cheap capital through quantitative easing, industrial workers in the rust belt bear the cost of stagnant real wages for 40 years. This structural contradiction manifests politically as the Trump phenomenon—his proposed tariff barriers and manufacturing return policies are essentially attempts to correct the excessive financialization of dollar hegemony. Although Trump is unlikely to succeed, the tearing apart of American society is the cornerstone that allows Trump to do as he pleases—the economic foundation of wealth disparity determines the superstructure of the redneck right and the rich white liberal daughters—screw you, childless cat-loving women, world peace, I just want to make money and raise my kids.
The fiscal deadlock of debt expansion
The key point at which US national debt exceeds $36 trillion marks the countdown for the dollar system to enter the 'Minsky Moment'. According to estimates from the Congressional Budget Office, by 2033, net interest payments will account for 34% of federal revenue, meaning that for every $3 in taxes collected, $1 will be used to pay debt costs.
When debt growth relies on the expansion of the Federal Reserve's balance sheet, the international reserve status of the dollar ironically becomes a destroyer of fiscal discipline. Besides trying to increase tariffs to make some money to fill the holes, the big beautiful bill that was criticized by Musk is delaying America's decline.
The reversal of cost-benefit in maintaining dollar hegemony
Maintaining 153 overseas military bases incurs an average annual cost of over $80 billion, equivalent to a burden of $250 per American taxpayer. This 'military-currency' composite hegemony model can still maintain cost transfer under a unipolar pattern, but as the trend of multipolarity strengthens, its marginal benefits have significantly declined.
The decision of the Trump administration to withdraw troops from Afghanistan reflects the conservative forces' reevaluation of the costs of hegemony, and distancing from the Russia-Ukraine war further makes WANWAN feel betrayed.
Various factors have turned the entire country of the US into a unreasonable 'asshole', which requires an asshole as a leader to restore the founding principles of America, necessarily abandoning dollar hegemony and low interest rates, because low interest rates mean further widening the wealth gap. Don’t be fooled by Trump’s constant calls for low interest rates; that’s just a short-term solution to the US debt problem, but essentially, the shift towards a right-wing isolationist national ideology will ultimately accompany an era of high interest rates.
If you think I’m talking nonsense, please tell me why the DXY dollar index, which has remained strong for so many years, has plummeted since this year, coinciding with Trump's presidency? Because Trump came with a mission, intentionally weakening the dollar to undermine the traditional financial forces within the US.