GlobalIntelHub.com — 4/2/2025 — The US Dollar has been a Global Reserve Currency since World War 2, as explained in Splitting Pennies – FX is the story here, not Tariffs. Global Macro drives markets, not the reverse- which is driven by 2 forces: 1) The Fed and 2) The White House. Everyone knows the Fed, but many underestimate the power of WH Policy in the Global Macro Narrative (Until now, huge wake up call). The Biden Administration was more subtle in the creation of inflation using Sanctions against Russia that killed 2 birds with one policy stone, inflating the balance sheets of the Elite while squeezing the people through inflation. The move created a rift between the Commodity currencies (BRICS+OPEC) vs. the Fiat/Inflationary blocs (G8 et al), where US consumers saw the price of eggs and everything skyrocket, without any understanding why (They tried to blame COVID but people weren’t buying that).
The tariffs are being immediately offset in FX markets, the US Dollar is down on the US implementing the policy. This is more acute and obvious than Biden’s inflation plan which was covert, subtle, and involved forces that few understand, it was a currency debasement against commodities. But look at this, if the US is to rebuild the manufacturing base, a weak USD is exactly what it needs – so that foreign consumption can fuel new growth, new factory construction, and R&D. But the biggest story here is not re-shoring, although that is very important, it’s the US being a global reserve. The US Dollar is backed by:
- The system in its entirety (Freedom, a legal system including shareholder rights, consumer protections, and fraud prevention). I can hear your eyes rolling! Just compare doing business in USA compared to ANY OTHER COUNTRY, how about China?
- The assets in total that the US has.
- The Manufacturing base, including the Venture Capital industry. America has human capital or intellect which is a direct asset, that spawned companies like Apple, Google, Amazon, Microsoft, and thousands of others.
When the current FX regime was created at Breton Woods, the US was the sole global manufacturer, China was a rural wasteland, Japan and Germany were bombed and in ruins. The US Marshall plan backed Breton Woods by giving US Dollars to the world, so they could a) rebuild, including their own manufacturing base and b) buy US products. Sales of Coca-Cola before and after WW2 were materially affected by this campaign, especially non-US sales exploded [1].
So this nonsense that the US Dollar is “Backed by nothing” is utter nonsense. It’s backed by bombs, it’s backed by the US Legal system, it’s backed by Silicon Valley. Oil is priced in Dollars, thanks to Nixon – and so if you convert your currency to USD you can invest in Palantir, in Microsoft, in Google, and you can own Real Estate in your own name (not “Freehold”). For many in the world, that is meaningful. Foreign Direct Investment (FDI) makes up a large percentage of total US investment.
With all the pain and suffering in the short term, these measures WILL have a VERY positive effect on the US economy, US markets, and actually the foreign exporters like China as well.
- The US Asset Balance Sheet will balloon, but based on sustainable growth, not borrowing and inflation
- Jobs will be created
- Revenues will skyrocket
- Government Deficit will become a Surplus, and it will be shared with people
- Quality will improve
- Waste, crime, homelessness, disease will plummet
This is exactly the opposite of what’s been happening for the past 70 years. The US is in a situation where the previous monetary regime of borrowing against the future created inflation and a huge garbage asset class of failed businesses, and workers can’t afford the basics.
There are debates on how this could have been executed better, but it would have only lessened the drama- the real economic effect wouldn’t matter. The stock market was mostly overinflated anyway, what is the P/E of the typical MAG7?
Scott Bessent explains this eloquently [2]:
He pointed out that the stock market downturn didn’t start with tariffs—in fact, it began with China’s “DeepSeek” moment earlier this year, calling it “A MAG7 problem, not a MAGA problem.”
Bessent pointed out that economic reordering is all about preventing a crash that would’ve happened given the explosion in government-fueled spending.
Bessent downplayed the risk of tariff-driven inflation, describing the tariffs as one-time adjustments. He added that Trump is “raising wages for working Americans and reducing regulations,” and noted that the upcoming tax cut bill, along with falling energy prices and interest rates, will benefit the working class
Pressed by Welker on tariff negotiations with trading partners, Bessent said, “I think we’re going to have to see what the countries offer and whether it’s believable,” adding, “We are going to have to see the path forward. After 20, 30, 40 years of bad behavior, you can’t just wipe the slate clean.”
Tariffs and how they affect Venture Capital Talk
There’s no reason to elaborate on this more as time will show this is the model that produces the optimal experience for US Citizens and companies doing business here. It creates positive energy, the least waste and ‘side effects’ – and overall we’ll all make more money, be more productive, and be happier in this regime. Once our basic needs are met, we can discuss higher experiences and develop a common spirituality. The current hoarding dog eat dog model pits us against each other to fight like wild animals over scraps. For the first time in a long time, both the haves and the have nots have skin in the game.
Book and Course
Learn Venture Capital and Private Equity in this concise course and book, for industry professionals and novice alike. Order Here – Venture Capital Udemy Course
Venture Capital Cross Portal coming soon!
References
[1] https://www.historyoasis.com/post/coca-cola-sales-history
