3 Things: Strategic Currency Reserve, Tariffs, U.S. Debt Crisis

2025-03-05 09:20:00 ET

Summary

• The Trump administration announced a Cryptocurrency Reserve Fund based on the idea that we need a reserve of other assets to help bolster the dollar and maintain its status. But such a fund does nothing to help the dollar and very likely undermines it.
• The early reads on the tariffs look really bad. Monday’s ISM report was filled with commentary about how the tariffs are hurting corporations. And then we got another big downward revision in the GDPNow because of it.
• Ray Dalio predicts an impending US debt crisis within three years if something isn’t done to reduce the deficit. I do think Dalio is directionally correct on the deficit, but we’re not there now, and I don’t see a scenario in which we’ll get there in the next 3 years unless Trump really explodes the deficit.
• The demand for the dollar is unmatched, and that helps keep inflation low. So, if the USA experiences a hyperinflation and debt spiral, then that means the entire system is collapsing, since the US financial system underpins the entire system.

Here are three bad ideas I think I am thinking about:

1) The Reserve Currency Issuer Doesn’t Need a Strategic Currency Reserve

The Trump administration announced a Cryptocurrency Reserve Fund that would hold Bitcoin, Cardano, Solana and Ripple. They seem to think the US needs this fund to help support crypto innovation and potentially hedge against currency risks. I don’t know how else to say this, so I’ll just be blunt about it - this has the potential to be one of the most extraordinary misuses of taxpayer funds based on some of the most extraordinary misunderstandings I have ever seen. Let me explain....

Read the full article on Seeking Alpha

For further details see: