jakiro
Author: Ding Ping
A systemic “great devaluation” is sweeping the world on an unprecedented scale, and the eye of the storm is the Federal Reserve in Washington.
This institution, once regarded as a global financial stabilizer, is now paradoxically becoming an accelerator of this great devaluation.The pressure it endured was far from ordinary——On the left is the abyss of resurgent inflation, on the right is the cliff of economic recession, and around its neck is a sharp knife from the White House..
This embarrassing scene of internal and external troubles accurately coincides with the predictions made in a book called “The Great Devaluation” many years ago.When economist Daniel Baratta wrote about the “debt bomb” and “crisis cycle” predictions in this book, the market laughed it off as yet another scaremongering.
But today we were horrified to discover that it was not a prophecy, but a script that had already been written.
The core of the large-scale depreciation of US dollar assets is actually the collapse of the authority of rule makers and the failure of system functions, which in turn will affect the wallets of every ordinary person.
So, how can we keep our chips in this “great depreciation”?
Erosion of purchasing power
We are in the midst of a systemic “great depreciation” led by the U.S. dollar, and stubborn inflation is the most intuitive bill for this depreciation.
U.S. CPI data for June 2025 show that the inflation rate has rebounded to 2.7%, and the core PCE price index is also stubborn, at 2.7% in May.More importantly, the tariff policy implemented by the Trump administration is widely regarded as an “accelerator” for inflation, which may push up the cost of imports and drag the entire U.S. economy into a “quasi-stagflation” quagmire.
This means that every dollar is depreciating at an accelerated rate.What’s even more fatal is that this depreciation is almost irreversible.
What exactly is the “death sentence” for this depreciation of the US dollar?The answer lies in another prophecy of Bharata:Out of control sovereign debt.
Baratta once asserted that the U.S. national debt would hit $50 trillion—at the time, this sounded like fantasy.But when U.S. debt has already exceeded the $36 trillion mark, we have to admit that this prediction is no longer far away.
What is the crazy acceleration of this number?
YesOut of control fiscal discipline.Only in the first six months of fiscal year 2025(October 2024 to March 2025), the federal government’s deficit has exceeded US$1.3 trillion, which is equivalent to printing more than US$7 billion in debt every day.
But more deadly than the size of the debt itself is its interest.This amounts to more than $1.2 trillion in annual interest payments(Deutsche Bank predicts that interest on U.S. debt may exceed US$1.3 trillion this year), has even surpassed the U.S. defense budget and become the fastest-growing expenditure in the federal budget.It creates no value, does not invest in the future, and its only purpose is to extend the life of old debt that keeps rolling over.
And the fuse that detonated the bomb was already right in front of us.In 2025, $9.2 trillion in national debt will mature, accounting for a quarter of the total.In the current high interest rate environment, every time “borrowing new money to repay old money” is tantamount to drinking poison to quench thirst, and the cost rises sharply..
Some people hope that the U.S. dollar stablecoin market can “transfuse” U.S. debt, but this is not realistic..The volume of stablecoins of US$250 billion is equivalent to the total amount of U.S. national debt(over 36 trillion US dollars)In comparison, the proportion is extremely small.What’s even more fatal is that there is a fundamental mismatch in the demand structure between the two: what the U.S. bond market lacks most is long-term “ballast” funds that are willing to hold for ten or twenty years, while stablecoins provide “passing money” that only seeks short-term liquidity.This structural contradiction determines that stablecoins cannot become the savior of U.S. debt.
Meanwhile, official actions are adding gasoline to the fire.The “Big and Beautiful Act” signed in July 2025 directly pushed up the debt ceiling by US$5 trillion.According to the Congressional Budget Office(CBO)According to a calm calculation, this means that in the next ten years, the United States will add more than $3.4 trillion in new debt.
As Baratta said, when the snowball of government debt gets bigger and bigger, the motivation for cutting interest rates is no longer pure.It is not only a tool to stimulate the economy, but also a “painkiller” to relieve the interest pressure on huge national debts.Especially when the U.S. economy is not optimistic, any tightening policy adopted to curb inflation may lead to a hard landing of the economy.However, the cost of cutting interest rates is also very high, which is tantamount to “printing money” and will further dilute the purchasing power of the US dollar.
credit wavering
This depreciation not only erodes the purchasing power of the US dollar as a currency itself, but also shakes its credit foundation as a global hegemonic system.
First of all, it is reflected in the collapse of institutional credibility: a central bank that was supposed to be independent has now become a arena for political struggle..
The independence of the Federal Reserve, once considered the cornerstone of financial stability in the United States and around the world, is now crumbling under political pressure.President Trump’s ongoing pressure on the Federal Reserve is the most public and intense in recent decades.
Trump has publicly expressed dissatisfaction with current Chairman Powell on many occasions. Recently, Republican members of Congress have even pushed for a judicial investigation on the grounds of “overcost on renovation of the Federal Reserve Building” in an attempt to build a chain of evidence of Powell’s malfeasance.Although Powell firmly stated that the law stipulates that the Fed chairman can only be fired “for cause”, policy differences do not constitute a reason, and he will not resign voluntarily.
But this naked political attack has seriously disrupted market expectations.The market has also realized that the current Chairman Powell has been “emptied out” or marginalized, so investors’ focus will turn to the policy orientation of the next Chairman and begin to price this.
Fed Governor Waller, who recently publicly expressed his willingness to accept the nomination, and potential candidates such as Kevin Hassett are viewed by the market as candidates who are more inclined to meet the president’s demands for interest rate cuts.When this prioritizes “political loyalty” over professional judgment, the century-old tradition of central banks is in name only.
When analysts at JPMorgan Chase also told everyone the truth about the emperor’s new clothes: the independence of the Federal Reserve has always been just a “myth” for people to admire.How can a Federal Reserve, which is firmly tied by the reins of politics, have any mission?Barata’s warning about being reduced to a “spokesman of interests” no longer sounds like a warning, but an accurate description of the facts.
The second is the collapse of global consensus: the “de-dollarization” movement of voting with your feet.
The United States is now like a reservoir with structural cracks in its dam. No matter how the surface is reinforced, water loss is inevitable.So we see that the outside world is responding with actions: the world’s largest creditor countries have begun to systematically replace U.S. dollar reserves with gold, and more and more bilateral and regional trade are “bypassing” the U.S. dollar system.
At the level of reserve assets: Central banks around the world are increasing their gold holdings with unprecedented enthusiasm. Data from the World Gold Council shows that net purchases in 2024 will exceed 1,000 tons for the third consecutive year.Entering 2025, despite high gold prices, the gold buying trend continues.China’s central bank has increased its gold reserves for 18 consecutive months, and countries such as Poland, Türkiye, and India have also become the main buyers of gold.
In contrast to their increased holdings of gold, some countries are reducing their holdings of U.S. Treasury bonds.For example, China has been reducing its holdings of U.S. debt for several consecutive months.Although the overall data shows that the total holdings of U.S. debt by foreign investors are still rising, behind this is more tactical behavior such as short-term interest rate arbitrage.
At the payment system level: cross-border payment system in RMB(CIPS)Alternatives are emerging.In the first quarter of 2025, the total amount processed by CIPS reached 44.25 trillion yuan.
Facing the surging momentum of “de-dollarization”, the U.S. dollar system itself is also looking for solutions. At present, the most effective one is nothing more than the U.S. dollar stable currency.It can slow down the momentum in the short term, but ultimately it treats the symptoms rather than the root cause.Because the fundamental reason why the world wants to “de-dollarize” is distrust, not inefficiency. It is unrealistic for the United States to try to use technical efficiency to solve a trust crisis problem..In the long run, this will stimulate countries to accelerate the launch of their own digital currencies, eventually leading to a more diversified monetary system.
Therefore, when the “trust-reserves-settlement” triangle that supports the hegemony of the US dollar is eroded, its final external manifestation is the reset of the value of US dollar assets – this may be a more profound structural change than any simple exchange rate adjustment in history.
How to survive the “Great Depreciation”?
Another conclusion of Baratta points to a grand paradox that has lasted for nearly a century: the solution to each crisis often endogenously foreshadows the next crisis.
The crisis of the 1930s gave rise to Keynesianism and the large-scale practice of government intervention.Decades later, excessive intervention and welfarism paved the way for stagflation.The solution to the 2008 financial tsunami—zero interest rates and quantitative easing—directly led to global asset bubbles and the polarization of rich and poor after 2020.
The unprecedented fiscal stimulus and monetary releases implemented in response to the impact of the epidemic have brought us a new trouble – stubborn inflation.Trade protectionist policies in 2025 add a new variable to this complex inflation equation, which may push up costs from the supply side and make the problem more difficult.
The cycle of history is so clear at this moment: policy mistakes cause crises, and policies to respond to crises sow the seeds of the next crisis.As the core executor of this system, every decision made by the Federal Reserve is inevitably constrained by the policy consequences accumulated over the past few decades.
This tells us: The first chapter of all investment textbooks in the past has become invalid.Because when the rule makers themselves are repeating historical mistakes, those who blindly follow the old rules are destined to become the “collateral damage” of the times.
So, how can ordinary people avoid being harvested in this “great devaluation”?
First,“Don’t put all your eggs in one basket”.
The global multi-polarity pattern is irreversible, which means that the era of solely betting on US dollar assets has passed.We should also focus on value depressions, such asSome core assets of A-shares and Hong Kong stocks, as well as non-US currencies that have benefited from the wave of “de-dollarization”.
Secondly,Our investment must be anchored in scarcity.
In an era when legal currency is gradually losing credibility, what is the real anchor of value?The answer is definitely not those banknotes that can be issued infinitely, but the scarcity that cannot be copied..This is the fundamental logic behind gold’s ability to travel through cycles and fight against inflation – the more global inflation is, the better the gold price will be, because legal tender can be printed in large quantities, but gold cannot be “printed out” casually.
The same logic applies to commodities.When global inflation rises, the prices of industrial metals such as copper and aluminum, as well as energy sources such as oil and natural gas, tend to rise.The reason is simple: they are the basic resources for production and life in modern society, and their supply elasticity is insufficient.(For example, the investment cycle is long), but the demand is relatively rigid, allowing them to effectively maintain and increase value during periods of inflation.
In the digital world, the total upper limit of Bitcoin is set at 21 million, which is fixed and cannot be issued additionally, which makes it a representative of digital scarcity.Despite this anti-inflation gene, Bitcoin is not a safe haven that can be invested blindly.Its extremely high price volatility and regulatory uncertainty make its investment risky..
So do relatively stable stablecoins have the opportunity to become a new anchor of value?The answer is no.
The core value of stablecoins is by no means some “digital utopia” independent of sovereign credit.It just puts a “digital skin” on the U.S. dollar on the blockchain, providing first-class global liquidity.Its only trust anchor is still the U.S. dollar asset itself.When the entire fiat currency system, especially the credit of the US dollar, truly collapses, stablecoins will not be safe..
The end of an era is bound to be accompanied by huge pains and challenges.But for those few who can see through the cards and plan ahead, this is both a crisis and an opportunity.
