The decline of the US dollar won't result in a simple replacement by the Chinese Yuan. Instead, its core functions are fracturing: 'store of value' is shifting to gold and Bitcoin, while 'medium of exchange' is moving to a multi-polar system of local currencies like the rupee and yuan.
Like the cartoon character who runs off a cliff and only falls after realizing it, the economy may be fundamentally insolvent but continues to function on momentum. The eventual collapse will be sudden and digital, triggered not by a gradual decline but by a collective moment of realization.
While the 2008 crisis centered on commercial banks and mortgages, today's problem is rooted in the central banks themselves. The Fed's policies actively devalued US treasuries—the bedrock of the system—making this a more fundamental central banking and currency crisis, not just a banking one.
Communism seizes wealth overtly, like a lion. In contrast, Keynesianism, through inflation and money printing, is a 'camouflage predator.' It drains wealth so subtly via currency devaluation that citizens, like a host to a mosquito, often don't even perceive the attack until it's too late.
Both the Bush and Clinton administrations promoted policies to increase homeownership, pushing banks to lower lending standards. This government-led initiative, aimed at social goals like ending redlining, fueled the subprime mortgage bubble that ultimately collapsed the financial system, implicating policy makers alongside banks.
The US response to the 2008 crisis—massive money printing—exported inflation globally. This led to sharp increases in food prices in places like the Arab world, creating economic hardship that became a key, though often overlooked, trigger for the widespread social and political upheaval of the Arab Spring.
After 1991, without the Soviet Union as a counterbalancing power, US foreign policy shifted from pragmatic containment to an interventionist, 'neocon' crusade. This ideology of a 'responsibility to protect' led to costly, destabilizing 'forever wars' in the Middle East, a departure from the more measured Cold War approach.
The Cantillon effect meant newly printed money flowed to coastal financial centers, massively enriching Democrat-leaning congressional districts. Meanwhile, Republican-leaning areas felt the inflation last, effectively transferring wealth and creating a huge economic gap between the two parties over a decade.
The Federal Reserve encouraged banks to buy long-term treasuries while signaling low rates, only to then hike rates at a historic pace. This action decimated the value of those bonds, making the world's 'safest asset' the riskiest and directly triggering bank collapses like Silicon Valley Bank.
The current banking crisis isn't a sudden panic run. Instead, it's a 'bank walk,' where deposits consistently move out of regional banks into higher-yield money market funds. This slower, sustained outflow creates a protracted crisis that unfolds between quarterly reports, masking its severity.
The maxim "buy low, sell high" is psychologically hard because it forces you to act against the crowd's emotional consensus. It's like flying by instruments when everyone else is calm and looking out the window. This act of trusting abstract data over social proof feels deeply unnatural for humans.
The strategic competition with China is often viewed through a high-tech military lens, but its true power lies in dominating the low-tech supply chain. China can cripple other economies by simply withholding basic components like nuts, bolts, and screws, proving that industrial basics are a key geopolitical weapon.
Financial and political systems can unravel at an exponential pace. The collapse of SVB took two days to trigger a $300B printing, while the USSR went from superpower to non-existent in just two years. This highlights the danger of slow reaction times, where waiting for clear signals means it's already too late.