The dollar index has a 100% correlation with global economic crises since the late 90s, rising with every major event including the Russian debt crisis, dotcom bust, 9/11, global financial crisis, euro sovereign crisis, COVID, and 2022 rate hikes.
The dollar milkshake theory serves as a framework for understanding the system, not predicting crises, helping investors comprehend knock-on effects and potential sovereign debt crises.
Current dollar sentiment is extremely bearish, with RSI and stochastics at 20-year lows, indicating widespread aversion to the currency.
Market participants are short the dollar more than ever in 20 years, potentially setting it up for a significant upward movement if economic conditions deteriorate.
The dollar’s technicals are extremely bearish, with daily support at 14-15 year lows and weekly support just above, while sitting at support on all daily, weekly, monthly, quarterly, and yearly charts.
The permanent portfolio concept aims to eliminate severe drawdowns, focusing on protecting investments rather than being right or wrong about market predictions.
Understanding the dollar’s impact on global economies can lead to better portfolio decisions, with the dollar index serving as a weather vane rather than an investment itself.
The dollarization process occurs when the dollar strengthens, causing defaults and dollar destruction, distinct from red dollarization which happens when the dollar weakens and increases supply through loans.
Major currencies like the euro, British pound, Canadian dollar, and Swiss Frank are at 20-year highs in sentiment, positioning, RSI, and stochastics, while the yen is in a neutral position.
According to Brent Johnson, BRICS countries are unlikely to launch a competing currency to the dollar in the near future, with any potential development being years away.
The $3.3 trillion “Big Beautiful Bill” combines spending, tax, immigration, and healthcare policies, making it difficult for fiscal conservatives to oppose due to various interests and perceptions.
The bill increases the debt ceiling by $5 trillion, potentially taking US debt over $40 trillion, while the world continues to buy US debt despite knowing Congress won’t spend within its means.
75% of the federal budget is locked into nondiscretionary spending on entitlements like Social Security and Medicare, making significant cuts nearly impossible without public outcry.
Most congressional districts are gerrymandered to lean 60-40 R or D, making primary challenges the biggest concern for members rather than general elections.
There’s no longer a party for fiscal conservatives, as neither Democrats nor Republicans are serious about cutting government size, spending, or the regulatory state.
The US is entering an era of “permanent large deficits” with Congress spending twice what it brings in taxes annually, risking a long, slow decline as the world’s economic superpower.
America’s fiscal situation mirrors Britain’s decline from 1900 to 2000, potentially losing its status as the global economic leader due to lack of fiscal restraint.
The US government’s ability to maintain artificially low interest rates is unlikely to continue, as historically, the cost of capital has been in the low double digits.
Gold is decoupling from standard economic indicators and becoming a safe haven asset due to increased price inflation and political unease.
While some hope technology and AI will drive productivity growth to offset fiscal challenges, scarcity of resources remains a fundamental economic constraint.
The current monetary system is broken beyond repair due to governments’ unlimited credit, leading to a shift towards tokenized gold as a potential future of money with instantaneous, zero-friction transactions worldwide.
A monetary reset is imminent as the Western fiat dollar-based system self-destructs, likely involving a decentralized gold-backed currency (token) with honest custodial holders.
Tether’s gold stablecoin, a hybrid cryptocurrency 100% backed by gold, could represent the future of money if implemented correctly, potentially driving gold prices to $10,000.
The popularity of gold-backed stablecoins is validating the thesis that cryptocurrencies create gold bugs by educating people about sound vs. unsound money.
Transitioning to a gold standard would require a 75% devaluation of currencies, a process currently unfolding as markets drive gold to higher levels.
Building a balance sheet with gold, silver, and tangible assets is crucial for preserving wealth as fiat currencies lose value.
The intersection of cryptocurrency and AI poses risks, as sufficiently powerful AI could break encryption, potentially causing a $10 trillion loss in investor capital.
The gold standard’s checks and balances rely on people’s ability to buy, sell, or withdraw physical gold, maintaining pressure on governments to preserve currency value.
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