If you’re here for a balanced view…

To hear the pros…

And the cons…

The “fors”…

And the “againsts”…

You’re in the wrong place.

But not providing balanced views doesn’t mean we have one view and stick with it.

What we most like are interesting views.

Sometimes they confirm our thoughts. Other times, they challenge them.

So, if it’s interesting, and seems like it could make sense, we’ll let you know about it.

Then, we’ll leave you to decide if you’re “for” or “against.”

The interesting view today?

The “end of the dollar” and that maybe it’s too soon to write it off.

We’ll show you what we mean today. But first, our regular trip around the markets (Editor’s note: feel free to skip ahead, if you want to cut to the chase)…

Market Data

The S&P 500 closed down 0.2% to end the day at 4,538.19… the Nasdaq fell 0.6%, to close at 14,199.98.

For individual stocks, Microsoft closed down 1.2% to $373.07… Apple ended lower by 0.4% at $190.64… and Tesla ended the day at $241.20, a 2.4% gain.

In commodities, today’s prices and the gain or fall over yesterday, West Texas Intermediate crude oil trades at $77.84, up 34 cents… gold is $2,000.70 per troy ounce, a $20 gain… and bitcoin is $36,990, down $489 from yesterday.

And now, back to our story…

There’s More to the “End of the Dollar” Story

One theme that never dies is the idea that the dollar’s days are numbered. That the world is facing “de-dollarization.”

That’s the Wall Street and macroeconomic term to suggest the U.S. dollar just isn’t as popular as it used to be.

This year, this subject has been bigger than ever…

That’s driven by big headlines, as countries like Russia and China have moved to increase their bilateral trade using their own currencies, not the dollar.

On top of that, oil-producing nations are threatening to trade and settle oil trades in currencies other than the dollar. Saudi Arabia and China have already started down this path.

If the trend continues, Americans should rightly be concerned about it.

After all, the dollar has been the world’s “reserve currency” since the end of World War II. That means that every country needs to own dollars. Especially for international trade.

That has been good news for America.

The U.S. can print dollars… as we’ve seen, almost as much as it wants… and thanks to strong international demand, it doesn’t feel the full brunt of the inflation that would otherwise occur.

(For comparison, refer back to yesterday’s essay on Argentina. That country doesn’t have a “reserve currency” that the rest of the world must use. So if it prints too much of its own currency, investors and capital will desert the economy, and it devalues the currency, causing inflation.)

French president Charles De Gaulle even went so far as to call the dollar’s reserve currency status an “exorbitant privilege.

He was right.

So there you have it. Russia and China dumping the dollar in trade between the two countries… Saudi Arabia and OPEC exploring ideas of ending the dollar-linked oil trade… and everyone generally being a “Debbie Downer” about the dollar’s prospects.

It must be true… the world is de-dollarizing.

Or… is it?

Here’s where it gets interesting.

Data on international payments from SWIFT (Society for Worldwide Interbank Financial Telecommunication) shows that the world may not be de-dollarizing at all. In fact, it may be “de-euroizing.” That is, it’s using the euro less in international trade.

But rather than the big winner being the Russian ruble, Chinese yuan, or Saudi riyal… instead, it’s the good, old-fashioned American greenback.

Dollars Up, Euros Down

Check out the chart below. You can see how the U.S. dollar trended mostly sideways for several years before it began surging ahead earlier this year:


Meanwhile, after also trending sideways for several years, demand for the euro has simply collapsed at the same time use of the dollar has surged.

So those calling for the death of the dollar – we’ve been among them – may be right in the long term. But in the short term, hold your horses. Because it may take some time.

After all, replacing a world reserve currency isn’t necessarily an easy process… and even if ditching the existing one was easy, what would replace it?

[Editor’s note: Colleague Teeka Tiwari would say bitcoin… but even he may concede we’re not quite ready for that, at least yet…]

Based on the chart above, the new reserve currency isn’t likely to be the euro.

The Eurozone is struggling. It’s still reeling from Brexit, and no one can guarantee another member state won’t leave.

Just compare the European Union’s economy to the U.S. economy.


Source: World Bank (2021/2022 data)

Sure, it doesn’t tell the whole picture, but it’s a start.

The euro just doesn’t look like a credible threat at all to the U.S., or to the position of the dollar as reserve currency.

It’s not even close. Simply put, the average American has nearly twice the financial firepower of the average European.

So what could replace the dollar or euro?

China? Well, it sure has the economic growth – although watch out for its real estate market.

The big problem, of course, is it doesn’t have the full trust of the Western international community. China has built its economy, in part, with a currency that was pegged to the U.S. dollar.

The argument is that the “peg” was set at an artificially low level, making China’s exports cheaper than they otherwise would be.

And frankly, while the U.S. government and Federal Reserve have done plenty to destroy trust over the past 20 years, it would still be a big leap of faith for markets to allocate capital and savings to China in the same way as they have done to the U.S.

So the bottom line is this…

In terms of an official global reserve currency, the dollar still holds the top spot. The world may not like the dollar… but as we’ve often heard, “It’s the least-worst of any government-issued currency right now.”

Treasury Data Hints at the Dollar’s Next Move

But what about that other key investment for foreigners, U.S. Treasuries? Does that tell us anything?

That trend held up well this year.

As Reuters recently reported:

Foreign holdings of U.S. Treasuries in August rose to their largest level since December 2021, data from the Treasury Department showed on Wednesday, rising for a third straight month.

Total holdings of U.S. Treasuries climbed to $7.707 trillion in August from $7.655 trillion the previous month. Compared with a year earlier, overseas holdings were up roughly 2.8%.

Japanese investors raised their stash of Treasuries to $1.116 trillion from $1.112 trillion in July. Their August holdings were the largest since April, rising for a third straight month.

In short, for all the talk about the imminent end of the dollar’s dominance, there’s still life in the old thing.

But how long can it last?

U.S. government debt stands at more than $33 trillion.

Plus, maybe it’s just perception, but the threats of federal government shutdowns seem to happen more frequently.

Even though we know the result will be the same – an increase to the “debt ceiling” and the government going further into debt.

We guess as long as investors, the markets, governments, businesses, and consumers continue to trust the U.S. dollar, it will remain the reserve currency… until something better comes along.

How long will we have to wait?

Is Bitcoin Really the Answer?

The more you look at it, the harder it is to argue against bitcoin having some kind of official status in the global markets.

After all, the fact that the U.S. dollar is the “least worst” of any government currency is hardly a ringing endorsement.

We’re not saying it will happen tomorrow – even crypto expert Teeka Tiwari acknowledges that. But it feels more and more as though the momentum is building towards it.

Governments and their central banks worldwide are developing their own central bank digital currencies (CBDCs), that will attempt to mimic some of the qualities of bitcoin.

But ultimately, they will still be controlled by their national government. Bitcoin, on the other hand, always has been and always will be independent of government control.

Your editor doesn’t claim to be a bitcoin expert. In many ways, we’re still somewhat of a skeptic. But the more we see and the more we read, that skepticism becomes less and less each day.

Whether you like bitcoin or not, it may be prudent to own some, at least as the best alternative to the U.S. dollar today.

More Markets

Today’s top gaining ETFs…

  • VanEck Gold Miners ETF +2.4%

  • U.S. Global GO GOLD and Precious Metal Miners ETF +1.5%

  • Invesco KBW Property & Casualty Insurance ETF +1.3%

  • iShares Gold Trust +1.1%

  • SPDR Gold Shares +1.1%

Today’s biggest losing ETFs…

  • SPDR S&P Semiconductor ETF -2.4%

  • Invesco China Technology ETF -2.2%

  • Global X MSCI China Consumer Discretionary ETF -2%

  • iShares Semiconductor ETF -1.9%

  • First Trust Brazil AlphaDEX Fund -1.9%


If you have any questions or comments for our experts here at Legacy Research, we’d love to hear from you.

Write to us at [email protected] and just type “Daily Cut mailbag” in the subject line.



Kris Sayce
Editor, The Daily Cut