What is the unseen foundation of the narrative surrounding the devaluation of the U.S. dollar?
It should be recalled that this is a core objective of the Trump 2.0 administration in order to address fiscal derailment and persistent trade deficits.
The hidden base of the narrative for devaluing the U.S. dollar rests on TINA: There Is No Alternative, meaning there is no alternative but to devalue the dollar until its value is nearly extinguished, while simultaneously proceeding with a repricing of all goods.
This is because changing course by reversing debt expansion and increasing the money supply, that is, inflationary monetary expansion, is impossible in an economy dependent on debt creation.
Without continuous debt expansion and ongoing dollar devaluation so that debtors can more easily service existing obligations, the economy would collapse.
As a result, continuing the same pattern that leads to collapse is considered a “solution” chosen by the status quo.
The second assumption of the dollar devaluation narrative is that those who hold cryptocurrencies, precious metals and other tangible assets will not only survive the coming crisis, but will emerge wealthier, since the value of their assets does not depend on fiat currencies, that is, currencies issued by central banks.
The winners and the losers
This leads to the following reasoning: if those who hold the keys of power know that the final outcome of devaluation will be the collapse of the U.S. currency and the economy, and they understand the economic destruction this would inflict not only on the majority of citizens but also on the wealthy, whose fortunes ultimately depend on a functioning economy, would they not consider pursuing a less destructive, albeit painful, strategy that avoids free fall?
Moreover, history has shown no mercy to governments that allowed their currency to collapse.
Those in power would be wise, for reasons of self-preservation, to seek a way to avoid the devaluation spiral of the world’s leading reserve currency, because their authority would not survive the entirely avoidable destruction of the currency and the economy.
In other words, is there a way to avoid the spiral of dollar devaluation that can restart the economy and allow for tangible improvements in quality of life, once the economy is detached from its fatal dependence on ever-growing debt and devaluation to sustain the illusion of “prosperity”?
The distribution of the cost of destruction
There is a way to reverse the deadly spiral, and the key for those in power is to distribute the inevitable pain sufficiently evenly so that no social class reaches the point of having nothing left to lose and seeks the complete overthrow of the existing order.
Over the past five decades, the status quo has steadily drained the poorest 80% of the population, directing all gains to the top 10%.
There were enough “crumbs” for the bottom 80% to remain compliant rather than revolt, but the pain of reversing devaluation could make rebellion more appealing than compliance.
Note that this redistribution was the result of policy choices that benefited those who profited from the financialization of the economy and globalization.
It was a choice, not fate.
For reversal to have any chance of success, policymakers must balance losses so that those who benefited most, the top 10%, bear the greatest share of economic damage, while sufficient essential goods are directed to the bottom 80% to prevent social upheaval.
Let us recall the data: the top 10% by income owns the majority of financial assets, while the bottom 50% owns just 2.5%, down from 3.5% in 1990.
The share of the top 1% has risen to 42% from 35.6%.
The only way to reverse the devaluation spiral is to end the economy’s dependence on ever-increasing debt to finance consumption and on an ever-expanding money supply to fuel asset bubbles that amplify wealth inequality and overconsumption by the top 10%, creating a distorted illusion of “growth”.
Make money more expensive
The most effective way to defend the dollar and suppress debt expansion is through managing supply and demand by raising Treasury yields and interest rates.
Global capital will flow toward U.S. bonds in search of higher yields, while demand for new loans will decline as borrowing costs rise.
Federal government borrowing costs will soar, constraining public spending, while debt-fueled consumption with fake money will collapse.
This is where the necessity arises to induce a recession that confronts dependence on debt and inflation, something the system has avoided for 45 years through excessive expansion of the money supply and debt.
At the same time, the Federal Reserve (Fed) would allow bankruptcies and defaults to reduce private sector debt, avoiding bailouts for Wall Street and “too big to fail” banks.
Overleveraged banks would collapse as a necessary step toward restoring a healthy market order, instead of propping up the largest gamblers, with the principle of moral hazard for creditors being genuinely enforced.
Simultaneously, authorities would liquidate assets and spread losses over time to manage the destruction.
It should be noted that nominal federal debt exceeding 38 trillion dollars accounts for roughly one third of total debt, while two thirds belong to the private sector.
Reversal requires a simultaneous reduction in the money supply by the Fed, causing a contraction in monetary circulation and strengthening the dollar, suppressing exports but increasing purchasing power for workers and businesses.
The necessary restructuring
The necessary restart will cause pain, but the only strategy that can work is the equitable distribution of losses.
Restructuring would overturn policies of the past 50 years that benefited the top 10% at the expense of wage earners, the bottom 90%.
For example, imposing the 15.3% social security tax that applies to the self-employed on all non-wage income, such as capital gains and stock options.
At the same time, eliminating distorted incentives for Big Tech, Big Pharma, Big Banks, healthcare and education would shift the pain to elites and sectors that benefited for decades from federal support.
The recession would reduce consumption and employment, triggering mass defaults and the write-off of trillions of dollars in debt.
All currency created through debt would vanish, and dollar circulation would shrink, reversing the deadly cycle of debt, devaluation and inflation.
Every step appears “impossible” due to resistance from powerful economic interests, but the collapse of the currency would inflict far greater pain on elites than a controlled reversal.
The final outcome is already visible.
The only uncertainty is the social reaction, its magnitude will depend on the policies adopted before the inevitable confrontation with the “desert of the real”.
And no one should assume that social collapse will not arrive simply because it has not yet been fully perceived.
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