Last week, China showed his military power and grew alliance with American opponents, including Russia, North Korea and, at least for the time being, India. But that violence show is not the only threat of the current Axis or Evil.
Even alarming is the treacherous attack of China and his allies on the US DollarRank alarms on global financial markets. China and other central banks have brought gold in stock, their reserves diversified from the US government bonds, which stimulates gold prices higher and the treasury yield yields. Their allies have followed the example.
Does it matter to most Americans? Yes. A weaker dollar means traveling abroad and imported goods are more expensive, even without rates. Higher interest rates increase the loan costs.
Gold can sparkle, but it is still money. Taxes must treat it in this way
Morgan Stanley reports: “The value of the US dollar against other currencies fell by around 11% in the first half of this year, the biggest decrease in more than 50 years, which ended a 15-year bull cycle.” The investment bank, which wrote last month, also noted that “the US dollar ended the first half of 2025 with its greatest loss since 1973”, and predicts more decline in the next 12 months.
While the dollar has fallen, gold prices have risen. The Comex price for delivery in September was recently $ 3,600 per ounce, a record high. The price has risen by 45% in the past year.
In June, JP Morgan analysts predicted that gold prices would largely go higher due to continuous purchases by central banks. They wrote: “Golden companies by central banks amount to almost 36,200 tons and account for almost 20% of the official reserves, an increase of approximately 15% at the end of 2023, according to reported IMF data until the end of 2024.”
China’s central bank is calling on government banks to reduce the purchases of US dollars
“Diversity away from the American dollar reserve companies, although still moderate, accelerates in recent years … The US dollar share ended the year by around 57.8%, which marked a decrease of 0.62 percentage points.”
Not all central banks have participated in the recent gold -purchasing Spree. JP Morgan quoted China, Poland, Turkey, India, Azerbaijan, the Czech Republic and Iraq as the most important players – not exactly a WHO’s who of our allies.
Investors have also bought gold, especially in China. “ETF inflow is strongly gained in strength, with a total inflow of year-to-date in the amount of 310 tonnes-what translates into about 10% into total global companies. This is largely fed by an increase of 9.5% in American companies and an increase of 70% in Chinese ETF companies.”
Why do China dumps dollars and do you buy gold? To undermine the American currency – and the US itself. Beijing is harshly impending the dollar and promoting the widespread acceptance of the Renminbi as the reserve currency of the world.
That will not happen quickly, given the currency manipulation of Beijing, a lack of reliable economic data and faltering economy. But increasing doubts about the power of the dollar serves the purpose of China, reducing investors the appetite for dollars. This forces the US government to pay higher interest rates to attract buyers – a scenario that is already playing.
Can the US dollar lose its reserve currency status to China?
The Anti-Trump-Media helped China’s cause with constant alarmism about President Trump’s economic policy, especially his tariff program. It is not surprising that the drumbeat of stories about rates, enforcement of immigration, cutbacks on government agencies and high federal shortages have weighed on public optimism.
Optimism is important. People do not buy houses, expand companies or leave jobs for better opportunities, unless they feel positive about the future.
People do not buy houses, expand companies or leave jobs for better opportunities, unless they feel positive about the future. (Joe Raedle/Getty images)
A gloomy consumer can easily create American growth. Ironically, Bloomberg recently asked: “The American economy is still in reasonably good form. The unemployment rate is low and the gross domestic product expanded an annual pace of 3.3% in the second quarter. Yet Americans don’t see it exactly, and the nagging question is … Why? Five years in an epic economic and stock market tree, everyone?”
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Perhaps Bloomberg should control its own headlines: “American inflation to rise as higher rates implement” and “Trump Trade war signals end of a golden era.”
Readers may be surprised to see the Financial Times walking a lot with the title “Bond investors count on Trump rate income to curb American debts”, suggesting that tariff income “will strengthen American public financing in a sharp switch from earlier this year” when investors had a uniform negative representation. When a lower court judged the rates of Trump illegally last week, even critics admitted that the tariff income was considerable, valuable and would help some of the damage of Joe Biden’s expenses.
Neither China nor the liberal media will break the US dollar or the economy. To lose the dollar its reserve status, a different currency should arise- and that does not happen. Europe continues to stagnate politically and economically and Japan is in turmoil.
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In the meantime, investment stimuli in the One Big Beautiful Bill Act, in combination with new trade agreements from the White House, are already a boost. Jobs and tax revenues will follow.
Treasury Secretary Scott Bessent told the Kristen Welker of NBC during the weekend that we will see ‘substantial acceleration’ in the economy by the year. If he is right, expect the dollar to return and the ambitions of China will be thwarted, at least for the time being.
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