Under the Dollar’s Thumb

It Was Four Years Ago…

We neglected to note a crucial anniversary yesterday in the annals of the U.S. dollar’s demise as the world reserve currency.

On Saturday, Feb. 26, 2022, Joe Biden announced what were touted as “crippling” economic sanctions against Russia. The Russian invasion of Ukraine began two days earlier.

Washington froze the dollar-based assets held by Russia’s central bank — $300 billion worth. The “thinking,” if that’s what you want to call it, is that the move would put sand in the gears of Moscow’s war machine. Biden bragged that “the ruble is almost immediately reduced to rubble.”

“Joe Biden crossed a critical red line on Saturday and the world will never be the same,” our Jim Rickards said in this space the following Monday. Already, he knew the score…

For the next 12 months, the Biden administration and the corporate media gaslighted the American public about how Ukraine was totally winning and Russia was on its last legs.

But on the one-year anniversary, the mainstream had to bow to the inevitable: “How Biden’s Shock-and-Awe Tactic Is Failing to Stop Russia,” was Bloomberg’s headline.

“Sanctions have inflicted damage, but they haven’t induced Putin to stop the war — raising wider questions about a tool that’s become increasingly central to U.S. foreign policy.”

Russia’s economy shrank in 2022 — but not by nearly as much as Western economists guessed. From there it went on to experience a wartime boom — notching a higher GDP growth rate than the United States.

And it wasn’t just about Russia: The moment the sanctions were imposed, dozens of governments around the world on less-than-friendly terms in Washington began wondering Are we next?

And they acted accordingly — trying to get out from under the thumb of the U.S. dollar.

The dollar’s share of global currency reserves took an unprecedented one-year drop — from 55% in 2021 to just 47% in 2022.

A one-year drop of eight percentage points is “equivalent to 10 times the average annual pace of erosion in the USD's market share in the prior years," said a report from Eurizon SLJ Asset Management. Eurizon’s researchers attribute the plunge to Washington’s “exceptional actions” against Moscow.

On the flip side, global central banks began accelerating gold — an asset that, as Jim Rickards always reminds us, “cannot be stolen, frozen or seized provided it is in safe storage.”

The jump in this chart that began in 2022? There’s no coincidence. The number was down in 2025, but still way higher than any year before 2022.

This buying will keep a floor under the gold price for years to come. (More about the gold price’s near-term prospects in Bullet No. 2.)

Sometime in the 21st century the dollar will lose its role as the globe’s reserve currency — as the British pound did in the 20th century, the French franc in the 19th, the Dutch guilder in the 18th and so on.

The best defense will likely be… gold. Certainly that’s been the case so far in the dollar’s slow-motion dethronement.

Another Week, Another Gold Milestone?

Gold is on track for another record weekly close — up $46 as we write to $5,229.

Interesting pattern here — a potential close over $5,200 this week, after a close over $5,100 last week and a close over $5,000 the week before.

That’s bullish. Even a close over $6,166 at day’s end would be bullish according to analysts who pay heed to Fibonacci numbers.

Silver is screaming higher — well past that $90 barrier we’ve been watching all month. At last check the bid is up over $5 to $93.44.

And the mining stocks are inching still higher into record territory, the HUI index approaching 970.

As for the stock market as a whole, it’s another red day on top of yesterday’s post-earnings letdown from Nvidia.

The S&P 500 is down 0.6% to 6,866. The Nasdaq’s losses are steeper, the Dow’s steeper still. Bloomberg is trying to chalk it up to “persisting concerns about an AI bubble” — but if that were the case the Dow would be holding up better than the tech-heavy Nasdaq.

Among the big movers today is Netflix — up 12% on relief that the company is backing out of its proposed takeover of Warner Bros. Discovery, the parent of HBO and CNN among other assets.

We said in early December this blockbuster deal might never come about. It was evident the Trump administration favored a rival takeover bid by Paramount Skydance. PSKY kept raising its hostile bid to a point where yesterday WBD said the offer was superior to that of Netflix.

Game over. Now the Ellison family will control CNN and CBS News and TikTok — every one of those acquisitions the result of government pressure. Very healthy for civic discourse in our country!

PSKY shares are rallying even harder than NFLX — up 22% as we write. WBD is down 2%.

The big economic number today is an inflation reading that came in hotter than expected. The producer price index jumped 0.5% last month, while the typical Wall Street economist figured on 0.3%.

Assuming wholesale prices feed through to the retail level, that means a coming uptick in consumer inflation. As such, futures traders assign only a 50-50 likelihood the Federal Reserve will cut short-term interest rates before midyear.

➢ Lest we forget, the latest crypto rally had no staying power: Bitcoin is back under $66,000 and Ethereum has sunk well below $2,000.

Don’t Try This at Home

In another instance of traders hedging their bets against a U.S. attack on Iran while markets are closed this weekend, crude is up $1.54 to $66.75.

Iran’s foreign minister says yesterday’s U.S.-Iran talks in Switzerland “made very good progress” and more talks are in the works next week. The only headline news from the Middle East today is the State Department authorizing the departure of nonemergency government personnel from Israel.

Any reaction in the oil price to a U.S. attack will be sharp — but potentially short-lived, says Paradigm trading pro Enrique Abeyta.

Consider Russia moving into Ukraine four years ago: “Despite sanctions and hostilities, Russian oil continued flowing to global markets, often at discounted prices.

“Prices may spike initially, but they often settle once traders assess actual supply disruptions rather than worst-case scenarios.”

Ditto for the impact on the stock market: “Stocks did fall sharply at first,” Enrique says of events in 2022. “Within months, however, many major indexes had recovered a significant portion of their losses.”

Looking forward, “the key question for long-term investors is not whether volatility will rise for a few days. It’s whether the event changes the long-term trajectory of corporate earnings and economic growth.

“In most historical cases, the answer has been no.”

And it’s hard to trade around short-term volatility: “These trades are complex. They require precise timing and a deep understanding of options pricing.

“For most investors, trying to trade around geopolitical headlines is more likely to cause stress than generate profits.”

Cuckoo Cocoa Prices

The wholesale price of cocoa has collapsed. Your retail price of chocolate will be slow to follow suit.

Cocoa futures traded under $3,500 per metric ton all the way from 1980 up until 2022. They soared beginning in 2023 and went vertical in early 2024.

It was supply and demand at work: Extreme weather and widespread crop disease hit cocoa farms in West Africa hard. Now crop yields are rebounding, sending prices down 68% — approaching pre-2022 levels.

But don’t expect the price of your chocolate fix to come down anytime soon.

“Manufacturers are still working through inventories purchased when cocoa was trading at elevated levels,” says the Demography Unplugged Substack.

“Analysts expect those higher-cost stockpiles to last until at least mid-2026. And given the extreme volatility of West African agriculture, producers remain cautious about cutting prices too quickly.”

Mailbag: Your Bank Wants Your Passport

“I don't usually start my emails off this way, but this is a FRESH, STEAMING PILE OF B***S**T!!!!” a reader writes after yesterday’s edition.

(And to be clear, she’s talking about the policy — not your editor’s analysis of the policy!)

“You are absolutely right, Trump's latest tease about signing an executive order mandating banks to collect proof of citizenship is just another excuse to subject legal citizens to more government surveillance. And it shows just how much Trump knows about the daily lives of the ‘little people.’

“You hit the nail on the head when you suggested, ‘If the goal is to encourage self-deportations, the simplest and most effective way to do that is to strip illegal migrants of welfare benefits.’

“Right?

“If he were really serious about encouraging illegal immigrants to self-deport, that executive order would require them to show proof of citizenship to cash a check or put money on a Visa gift card at Walmart, not at the banks.

“Thanks for elevating my bloo… er, keeping us informed! Kinda gives 5 ‘Bullets’ a whole different connotation. 😄”

“I bet the new super duper ‘Real ID’ will not be enough,” chimes in another.

“I needed my birth certificate for a SECOND TIME at the Oregon DMV, my Social Security card, two pieces of proof of address (recent bills or bank statements with my name and address) to get my ‘Real ID’ in Oregon.

“A few months back I tried to freeze my credit due to suspicious activity and was told my ‘Real ID’ was not sufficient to prove I was who I said I was!”

Dave responds: Yeah but the state has your biometric data now and the feds can ask for it at any time. Because it’s about their convenience, not yours.

That’s it for this week. Come back tomorrow for an interesting glimpse into how people are using AI — and where they’re located.