Will It Dollar To Crash? (Uncut) 04-26-2025

Everyone Is DUMPING The Dollar…Will It Continue To Crash?

Everybody is talking about how the United States dollar is crashing. We’ve actually seen the U.S. dollar continue to decline. U.S. stocks and the dollar plunged again on Monday.

Is this the beginning of the end for the greenback? Is it going to continue to plummet? And could we be seeing the dollar starting to lose reserve currency status? I’m going to answer these questions for you in three simple, fast steps. Step number one, let’s go over this historic move that we have seen in the dollar over the past month. So we’ll start by looking at a chart of the DXY.

Today’s date, it’s right around the 22nd, 23rd today, going all the way back to April 9th, so not that far. On the left, we go from 98 up to 104. Now, the DXY, just for clarification, is the dollar versus a basket of currencies, mostly the euro and the Japanese yen.

So going back to April 9th, then this was after Liberation Day. It was right around 102. It goes up to 103, and then it absolutely falls out of bed, going from 103 all the way down to a 99 handle.

Now, for a lot of you, you may say, ah, as far as percentage terms, that’s not that big of a deal. But this type of move in the United States dollar is almost unprecedented. Notice I said almost.

More on that in just a moment. Then it kind of flatlines. It churns a little bit here.

It goes down slightly till we get to the 17th, 18th, and then it goes down by another 1% in just one day, trading intraday below 98. So what does this mean? Well, in the past couple weeks or so, the dollar has gone down by 5% plus. And if you go back and look at the whole month, we see that we haven’t seen this type of decline in the US dollar since the Fed started doing QE during the GFC.

But let me be crystal clear. It’s not just the fact that the dollar is going down, represented by the DXY. It’s also that interest rates, treasury yields, have actually gone up during this same time.

To go over why these historic moves are such a huge red flag, Editor, let’s cut right to the internet so I can go over these charts in more detail. This is a zoomed-in chart of the DXY during the GFC, specifically September 2008. And we can see right around the 12th, the DXY trading about 80.

And then within a matter of 10 days, it goes all the way down and closes with a 76 handle. But it got down into the 75 range. But let’s assume that it just went down by 5%.

Pretty much the exact same thing that we have seen over the last two weeks in 2025. And what’s fascinating, if not a little bit scary, is if we look at a chart of the 10-year treasury yield, after we saw this huge decline in the dollar, a very rapid decline, it goes straight from 3.41% all the way up to 3.85%. So 40 basis points move higher in a very short period of time as the dollar is experiencing this extreme volatility to the downside. But that’s not all.

If we look at a chart of the S&P 500, it was extremely volatile going up and then absolutely plummeting and then going up again and then crashing once again all over the place. But the net result is the S&P 500 was going down. Sound familiar? The exact same thing that we have seen play out in the S&P 500, pretty much the dollar and interest rates since Trump announced all of these tariffs on Liberation Day.

So let me be very clear. When you’re seeing extreme volatility to the downside in the stock market, you should not see the dollar going down. And you definitely, definitely shouldn’t see interest rates going up at the exact same time.

These are huge red flags that something is happening beneath the surface that isn’t good. But what’s even more crazy is if we go to March of 2020, we can see this exact same thing happening with interest rates, the dollar and the S&P 500. So the main takeaway is we haven’t seen these bizarre price moves outside of the surveys of sickness and the GFC.

And one can assume that if the global economy is contracting, if there’s all this uncertainty, we have liquidity plummeting, which is probably why you see interest rates go up. So does this mean that the whole entire world is de-dollarizing? Are they just dumping the dollar? Are they dumping U.S. Treasuries? And by the way, dumping U.S. stocks, which is why we see all of these erratic price moves that you would expect to see when the stuff is really hitting the fan. And maybe more importantly, is this the first step? Are we starting to see the United States dollar lose its reserve currency status? And if this continues, should we expect to not just see down weeks of 5%, but maybe even down weeks of 10% or 20% in the dollar against other foreign currencies? In other words, a dollar collapse.

To answer that question, we’ve got to go back in time and not just look at the data during the surveys of sickness and the GFC, but also understand why we saw these extreme price moves. And that’s what we’re going to do right now. Step number two.

So is the world de-dollarizing? Answer, yes, absolutely they are. But they were de-dollarizing during the GFC as well. Let me show you what I’m referring to.

We’ve got three characters, Foreigner Fred, Foreigner Frank, who is pissed off at the United States, you can tell because he’s giving us the bird. And we have Foreigner Folly. Now, Foreigner Folly represents the balance sheet action here during the GFC.

Foreigner Frank, more so today. And Foreigner Fred represents all those entities out there that have dollar liabilities. In fact, if it’s dollar debt, that’s how the dollars were created to begin with.

More on that in just a moment. So let’s go back to the GFC. We’ve got Foreigner Folly here who’s got assets on the left, liabilities on the right.

This is his balance sheet. And his liabilities, whether it’s debt or payroll, expenses, whatever it is for his business, his liabilities are denominated in pesos. But he has some treasuries, that’s denominated in dollars, as assets on his balance sheet.

So he’s seeing what’s happening in the United States and all around the world. The bank’s blowing up, the global financial crisis, risk going through the roof. So he notices that he’s got some risk here from the standpoint that his assets are denominated in dollars, but his liabilities are denominated in pesos.

So this really gets him thinking, what should I do next? Well, to answer that question, we go right over to Frank who is in the process of, he is mad, isn’t he? So Frank represents what a lot of foreigners are doing now. To be clear, the foreigners now are doing the same stuff, but I’m just kind of compartmentalizing it so it’s easier to understand. So Foreigner Frank has assets on the left, liabilities on the right.

Notice he doesn’t really have any liabilities. He’s a big pension fund or something like that that doesn’t have any debt. So he’s just got treasuries on his balance sheet.

So what is he going to do? And by the way, foreigner folly, this process that I’m going to go over, it’s the exact same thing when he wants to unload his treasuries because he sees what’s happening with the global financial crisis and he wants to de-risk. So same process here. Treasury is sold into the marketplace because Frank, giving us the bird, he doesn’t want to deal with Trump or the United States or those stupid MAGA idiots anymore.

So he wants to get rid of these treasuries. He sells them into the market. What does he get in return? Well, obviously he gets dollars, but he doesn’t want those dollars either.

So he takes those dollars and he sells them right back into the marketplace because he wants euros. He doesn’t want anything to do with the United States dollar. He is de-dollarizing.

He’s fed up. So he wants to take these euros. Maybe he buys German boons or maybe he buys some sort of euro-denominated asset to replace this treasury he had to begin with.

But let’s think about what’s happened. He’s sold treasuries and he’s sold dollars into the marketplace. So what this means is that rates, all else being equal, go up because remember, there’s an inverse relationship between the interest rate or the yield on a treasury and the price.

So if he’s dumping into the market, price going down, rates going up. And what’s also happening is the USD dollar is going down because he’s taking those dollars and he’s selling them right back into the market to get the euros he wants. So this ends up creating the price action that we have seen recently, and it explains the price action that we saw during the GFC.

But they might just be doing it for slightly different reasons. One, out of anger. The other, out of fear.

So this is a process I think most people completely understand. And it explains the arguments for the dollar crashing because all of these foreigners are dumping their dollars or de-dollarizing. But what a lot of people fail to do in their analysis is the next step.

And this is the most important. So you’ll notice I’ve got one dollar right here and another dollar over here. Now, these are the same dollar.

So what’s happening is this is the dollar that Frank is receiving for his treasury. And then he takes that same dollar and he puts it back into the marketplace. So the market started with one dollar and where we are right now in the process, it still has one dollar.

Well, how was this dollar created? It was created by lending it into existence. So if there’s one dollar circulating in the marketplace, there has to be one dollar of debt on someone’s balance sheet. In this case, it’s Fred.

But you see, Fred has a problem because right now with the tariffs, with the uncertainty or back in the GFC, there’s a lot of uncertainty. I’m sure you guys have heard that word over and over and over again. So the result is that we see an economic contraction or we see economic activity declining.

Well, Fred has a big, big problem because you see, Fred has a business. That’s why he borrowed the dollars to begin with. And his business is dependent on cash flow coming in.

I’m sure all of you that have even had a lemonade stand knows how that works. So if he doesn’t have any dollars coming in, he’s screwed. Because at the end of the month, when he has to make his dollar denominated payment, there are no dollars in his bank account.

So he has to sell whatever currency is in his bank account. Let’s just say it’s Mexican pesos in order to get that $1 that exists in the market. So this $1 is no longer in the marketplace.

It goes on to Fred’s balance sheet. And now that dollar, geez, if I could get my pen open here, is now a peso. Floating around the marketplace.

And then Fred takes this dollar and uses it to pay off his debt. So now how many dollars actually exist? In this example, and obviously I’m oversimplifying it, but it illustrates the point correctly. In this example, it’s zero.

No more dollars left. But let’s remember, there is still demand for dollars because there’s other entities out there with dollar-based loans. Because you see, like my good friend Mike Maloney teaches us, when a dollar is lent into existence, there’s principle and there’s interest.

So there is literally not enough dollars circulating in the global economy to pay off all of the debt when you include the interest. So you get to a point, taking it to an extreme, where there’s $1 left, but there could be billions, if not trillions, of debt that is still due when you include the interest payments on the, let’s say, $75 trillion, using more realistic numbers, that exists in the world today. And this is why, if you go back to the GFC or to the Cerveza sickness, you do see this dollar decline in very rapid, scary fashion.

But then you also see the dollar snap back almost as quickly. The reason why is because the process starts with Foreigner Frank and Foreigner Folly selling into the market, but it ends with Foreigner Fred not having a choice, doesn’t matter how much he hates Donald Trump, he doesn’t have a choice but to sell whatever currency is on his balance sheet to get the dollars that he needs to pay down the debt, which reduces the supply of dollars. But let me be very clear.

The dollar could be absolutely losing reserve currency status right now as we speak. This could be what we’re seeing play out in real time. And the dollar could also continue to crash.

I’m going to explain how this could happen and what my base case is for the rest of 2025 regarding the dollar right now. Now, what I’d like to do is zoom in on a chart from my good buddy Brent Johnson, and we’re going to go back to the good old DXY using as a proxy for the dollar. But instead of going backwards, I want to look forwards.

So we’re going to start from today, go out to 2026, 27 and beyond, as our good friend Buzz Lightyear would say. So let’s assume we continue this trend of de-dollarization and the dollar is in fact losing global reserve status. OK, well, that means demand would definitely go down.

But if you think about it, supply would go down even faster because the way the monetary system is set up. And what I’m referring to specifically is banks creating the dollars by lending them into existence. So if you have demand going down, you’re going to generate fewer loans.

And on net, you’re going to have fewer loans being created that are being paid off. So supply goes down. So if, in fact, the dollar is losing reserve currency status because the world is de-dollarizing, you would actually see the dollar likely go up.

And the inverse is true. If the dollar was going down, it would tell us that the dollar was getting stronger as far as the world reserve currency because demand is going up. Absolutely.

But supply is going up even faster because those banks are creating more loans that are being paid off and therefore the supply skyrockets. But again, this is a result of more people wanting to transact in dollars and the velocity of those dollars increasing. That’s why the banks would be so willing to create all these dollar loans because the risk reward would make sense.

There’d be those profit opportunities where in this case, the banks, no way are we going to lend out into that environment. It’s too risky. Global liquidity is shrinking and economic activity is declining, especially the economic activity that is dealing with the United States dollars.

So the main takeaway is, do I think the dollar is losing reserve currency status? Yes, I do. It’s happening very, very slowly. You’re not going to see it the next five years.

But it’s a gradual thing, just like the British pound lost reserve currency status from, let’s just say the early 1900s, and it was solidified with Bretton Woods in 1944. It didn’t happen overnight. It was death by a thousand cuts.

And we’re probably at the beginning stages or the middle stages of that process right now. And because of this and many, many other factors that we don’t have time to get into in this video, my base case is the dollar at the end of 2025 and probably the end of 2026 is likely higher on the DXY than it is today. Understanding that there’s a lot of volatility in between and nothing goes up or down in a straight line.

But let me be very clear. If I am wrong and we do see the dollar continue to go down to, let’s say, 80 or even 70, where we saw in 2008 and into 2011, it would be a result of the global economy re-dollarizing, not de-dollarizing. Hey, guys, I’d like to personally invite each and every one of you to attend this year’s Rebel Capitalist Live.

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