No question about it. The petrodollar has given the US huge advantages but at real costs, macroeconomic and geopolitical entanglements that often conflict with other perhaps equally and sometimes more important concerns and interests. We're moving further into a multipolar world. The point is to figure out how to best manage that over all. Fragmentation and discord in the US doesn't help. But surely once the consequences become painful enough we'll wake up as a nation and devote ourselves to defending then rebuilding what is good and kind in our own traditions. We may be less powerful as an international hegemon but better for that as a world player. Hope so.
Markets continue to move higher. but not without tension beneath the surface.
The recent rally in U.S. equities, led by technology and AI-driven momentum, reflects strong earnings, resilient economic data, and continued confidence in future growth.
On the surface, everything looks stable.
But the foundation tells a more complex story.
Because while innovation is driving optimism, external pressures are quietly building at the same time.
Rising oil prices are reintroducing inflation concerns.
Geopolitical tensions are increasing uncertainty.
And strong economic data is reducing the urgency for central banks to ease policy.
This creates a unique dynamic:
Growth is strong enough to push markets higher
but risk is present enough to prevent full conviction.
Investors are no longer operating in a clear environment.
They are balancing two opposing forces:
The promise of acceleration,
and the reality of constraint.
And that balance is what defines this moment.
Because this rally is not built on perfect conditions
It is built on the ability of markets to move forward despite imperfect ones.
Interesting chart. I was surprised at the extent of the ups and downs.
It's hard for me to agree with a couple of your ideas.
"U.S. treaty allies, paying Iran in Chinese currency to move oil through a strait Trump has spent the past two months trying to pry back open by force — without success."
Success may be coming - it's too soon to call.
I'm wondering (I confess I don't know) if the allies paying Iran for safe passage are governments, or privately owned shippers. If private, possibly they find it cheaper to pay Iran than to pay extremely high insurance rates right now. Perhaps you could dig into that...
"Now, I’m not saying the dollar’s reign is ending tomorrow. But the trajectory is set"
Is it? Like I said, the ups and downs in the IMF graph look extreme to me, so it's very difficult to predict where it will go next.
In summary, I find it hard to believe in the demise of the dollar while we have a strong president who has the respect of the whole world - the exact opposite of what we had with the previous president.
Good chart and data. But, I think it may understate the problem. It's difficult to get an accurate picture due to the peculiarities of how foreign central bank holdings are reported through TIC data.
I know you were focusing on currencies and USD-denominated assets held by foreign central banks. But, if the focus is just on US Treasuries (rather than dollar-denominated assets), then gold meaningfully eclipsed Treasuries as a percentage of foreign central bank holdings in 2024.
But, even then it's difficult to get a real figure. TIC data includes Treasuries based on where they are domiciled, regardless of whether they are foreign central bank owned. So, a Japanese hedge fund that holds Treasuries at a Tokyo brokerage will be counted as a foreign central bank holding, as will Tether Treasury holdings domiciled in the Cayman Islands. If the Japanese Central Bank holds Treasuries but keeps them with a US brokerage, they aren't counted.
I'd be curious if anyone has a decent approximation of Treasuries actually held by foreign central banks. My understanding is that gold held by foreign central banks is easy to count; Treasuries, not so much. This is not my area of expertise, so I could easily be missing something.
No question about it. The petrodollar has given the US huge advantages but at real costs, macroeconomic and geopolitical entanglements that often conflict with other perhaps equally and sometimes more important concerns and interests. We're moving further into a multipolar world. The point is to figure out how to best manage that over all. Fragmentation and discord in the US doesn't help. But surely once the consequences become painful enough we'll wake up as a nation and devote ourselves to defending then rebuilding what is good and kind in our own traditions. We may be less powerful as an international hegemon but better for that as a world player. Hope so.
Markets continue to move higher. but not without tension beneath the surface.
The recent rally in U.S. equities, led by technology and AI-driven momentum, reflects strong earnings, resilient economic data, and continued confidence in future growth.
On the surface, everything looks stable.
But the foundation tells a more complex story.
Because while innovation is driving optimism, external pressures are quietly building at the same time.
Rising oil prices are reintroducing inflation concerns.
Geopolitical tensions are increasing uncertainty.
And strong economic data is reducing the urgency for central banks to ease policy.
This creates a unique dynamic:
Growth is strong enough to push markets higher
but risk is present enough to prevent full conviction.
Investors are no longer operating in a clear environment.
They are balancing two opposing forces:
The promise of acceleration,
and the reality of constraint.
And that balance is what defines this moment.
Because this rally is not built on perfect conditions
It is built on the ability of markets to move forward despite imperfect ones.
Which makes it resilient
But also highly sensitive.
The direction is upward.
But the margin for error is getting smaller.
Its officially broken. "we came, we saw, he died." - Hillary Clinton
Don't be hasty...
The US can continue the Iranian blockade for months. Iran can't wait that long..
US dollar dominance is reinforced thru swap lines. Like we just did in Argentina
Agree to disagree. USA / Israel can't wait that long. US dollar dominance is already in the rear view mirror.
How so? The US is remarkably insulated from most of the drastic shortages.
If anything, the Iran war has decreased exchanges in the petro-yuan. Not sure what you're basing your opinion on…
Interesting chart. I was surprised at the extent of the ups and downs.
It's hard for me to agree with a couple of your ideas.
"U.S. treaty allies, paying Iran in Chinese currency to move oil through a strait Trump has spent the past two months trying to pry back open by force — without success."
Success may be coming - it's too soon to call.
I'm wondering (I confess I don't know) if the allies paying Iran for safe passage are governments, or privately owned shippers. If private, possibly they find it cheaper to pay Iran than to pay extremely high insurance rates right now. Perhaps you could dig into that...
"Now, I’m not saying the dollar’s reign is ending tomorrow. But the trajectory is set"
Is it? Like I said, the ups and downs in the IMF graph look extreme to me, so it's very difficult to predict where it will go next.
In summary, I find it hard to believe in the demise of the dollar while we have a strong president who has the respect of the whole world - the exact opposite of what we had with the previous president.
Good chart and data. But, I think it may understate the problem. It's difficult to get an accurate picture due to the peculiarities of how foreign central bank holdings are reported through TIC data.
I know you were focusing on currencies and USD-denominated assets held by foreign central banks. But, if the focus is just on US Treasuries (rather than dollar-denominated assets), then gold meaningfully eclipsed Treasuries as a percentage of foreign central bank holdings in 2024.
But, even then it's difficult to get a real figure. TIC data includes Treasuries based on where they are domiciled, regardless of whether they are foreign central bank owned. So, a Japanese hedge fund that holds Treasuries at a Tokyo brokerage will be counted as a foreign central bank holding, as will Tether Treasury holdings domiciled in the Cayman Islands. If the Japanese Central Bank holds Treasuries but keeps them with a US brokerage, they aren't counted.
I'd be curious if anyone has a decent approximation of Treasuries actually held by foreign central banks. My understanding is that gold held by foreign central banks is easy to count; Treasuries, not so much. This is not my area of expertise, so I could easily be missing something.