4 “Fallouts” From a Weaker Dollar

“Never wrong—just early.”

Way back in my very earliest days in The Wall Street Journal’s Dallas bureau, an editor in New York asked me to step in and fill a void for a reporter who was out sick. I was to write an investment piece for the “Heard on The Street” column—at the time (1993) one of the most widely read investment columns in American finance.

The topic was the mortgage industry and the investment opportunities that existed there as housing began to recover from the recession of the early ’90s.

So, I wrote my piece and turned it in… and within an hour my phone was ringing.

On the other line was Gay Miller, an editor for the Money & Investing section.

She was very sweet to a cub reporter and called to chat about my sense of those investment opportunities. I told her I thought it was a really good moment to snap up a company like Countrywide Financial (this was 15 years before the housing crisis and fraud destroyed Countrywide) because as housing recovered, demand for mortgages would clearly recover too.

“So why not grab an industry leader on the cheap now,” I said.

“Then say that,” she told me. “Take a position and tell me why I want to be a buyer.”

As I journalist, I’d been trained to be objective, not to take a stance one way or the other. Just the facts, ma’am—let readers come to their own conclusion.

“Jeff,” Gay said. “This is the Heard. We’re never wrong—just early.”

It was a joke, but it has stuck with me all these years and has become my personal mantra.

When I make the long-term predictions that I make here in Field Notes and particularly in my Global Intelligence Letter, I make them through that lens of never being wrong. I’m just early to the party.

That belief is not based on arrogance.

It’s based on research and looking ahead at where the dots of today are likely to end up.

This is a lame and simplistic example, but if we know that the sun will rise at 6:17 a.m. tomorrow, then we can surmise that roosters are going to start crowing just after 4 a.m. That’s based on “anticipatory pre-dawn crowing”—yep, that’s a thing—that indicates roosters tend to start crowing about two hours before sunrise.

We’ve used a fact to connect dots based on logical analysis.

All of which to say: I’m truly worried about where America is headed now.

I’ve long expressed concerns about the decline of America and the dollar. That’s just a function of history and the concept of “long in the tooth.” No empire has ever survived, and no reserve currency has ever held that title beyond about 80 to 100 years, which is pretty much where the dollar is today on its timeline of supremacy.

I’ve been writing for a long time now that I suspect a crisis in some form in America in the 2027-28 timeframe.

That concern is substantially larger today because of the actions and the beliefs of the Trump administration. And please understand that I am not digging at Trump. This is not commentary on Trump.

This is an analysis for where America and the dollar go based on the administration’s actions and the beliefs that shape what the administration openly says it seeks to accomplish.

As I’ve pointed out in recent dispatches, Team Trump wants a weaker dollar as a way to bring competitiveness back to US manufacturing. And there are voices in the administration that question the wisdom of the dollar maintaining reserve currency status, since the result of that status is a dollar that is stronger than otherwise would be the case.

So that is a point of fact that we can pin to the board: America’s government openly desires a weaker dollar.

Now, let’s start connecting some dots.

What would a weaker dollar mean?

1. Inflation.

America imports a lot of finished goods and raw materials that US companies use to create Made-in-America products.

As the dollar declines, then the cost of the foreign products we buy requires that we spend more dollars to buy them. That’s not an opinion or a political statement. It’s just a function of math and the fact that currencies trade in pairs—one going down means the other must go up.

So a weak dollar means that the cost of living in America goes up.

Or said another way, lifestyle goes down since the dollars the typical American family earns will not go as far.

And what would losing reserve currency status mean?

2. Decreased demand for the US dollar.

As it stands, countries hold an unnaturally large quantity of dollars in reserve because those dollars are needed to lubricate a country’s global trade.

When the dollar is no longer the reserve currency—no longer necessary for global trade—the need to hold an overabundance of dollars vanishes.

And when that happens, then other dots start connecting. For instance…

3. Interest rates rise.

Here, I am not talking about the Federal Reserve raising interest rates. I’m talking about the bond market, which is more powerful than the Fed or the president or any government.

When demand for dollars declines, then there is little reason for countries like China, Japan, the UK and all the others to show up to the Treasury Department’s regularly scheduled Treasury auctions… which means there’s less demand for Treasury bonds… which means that interest rates on all the debt the US sells must rise in order to attract buyers… which means that:

1. Debt-servicing costs for Uncle Sam go up, forcing the US to borrow even more money just to afford the higher interest payments (a malevolent cycle that leads to fiscal crisis).
2. Mortgage rates rise. Mortgage rates are largely tied to the 10-year Treasury bond, not the Fed Funds rate that the Federal Reserve pushes and pulls on. As 10-year Treasury yields rise, mortgages will cost more… which means housing prices ultimately fall because buyers can only afford so much in the monthly mortgage payment. Higher rates mean higher interest costs, which means the principal needs to fall to keep payments affordable.
3. Credit cards, home-equity lines of credit, and auto loans/leases rise. What happens with mortgages happens here too. So interest payments will be pulling more money out of Americans’ wallets, leading to a declining standard of living.

4. Rising consumer costs.

This goes beyond the inflation I mentioned above.

As the dollar’s value falls, prices for purchases like gasoline rise.

Oil is priced globally, not locally. In dollar terms, oil prices will be higher… so gasoline prices will be higher (and probably much higher).

The only way the US can prevent gasoline prices from rising is by imposing price controls, or forbidding US oil producers from selling their barrels of oil overseas and instead forcing them to sell their oil to refiners in the US at a pre-determined price lower than the world market.

Alas, that’s the path toward deprivation, since drillers will be losing money and many of them will simply choose to shut down rather than comply with price controls.

The end result of that is hyperinflation, as seen in places like Zimbabwe and Venezuela.

All of which brings me back to “never wrong, just early.”

More than a decade ago, I was warning readers about the red/blue divide that was going to reshape American society and, quite likely, lead to states pursuing secession.

Pretty much everyone thought I was a buffoon.

And yet here we are, exactly where I said we’d be.

Similarly, I’ve been warning for years that the dollar was destined to lose reserve currency status, and again pretty much everyone thought I was a buffoon for believing that.

And yet here we are. Powerful voices inside the Trump administration are calling for that… or at the very least calling for the dollar to lose its strength.

The thing about reserve currencies is that when they lose their strength, they ultimately lose their reserve status.

But you, dear reader… You can protect yourself from what’s to come.

Very soon… On Friday, May 2, to be exact, I will be sharing with you full details of a special in-person Summit I’m organizing—specifically to deal with the fallout from a weaker dollar.

The changes in the offing will be very messy and discomforting for those who are unprepared for the reckoning that’s finally beginning to materialize.

I called this reckoning years ago. I said the dollar would weaken sharply and likely lose reserve currency status…