The Market

In the early 1990s a well-known global investment strategist, a real smart guy, predicted that “Years from now Europe will be one big open-air museum”. He based his assertion on the idea that Europe was too bureaucratic and stuck in their ways. There was no innovation. There were limited reasons for people to invest in Europe. In his eyes, Europe was doomed.

He clung to the idea that Asia would rise, and the US would remain the most dynamic attractive country in the world for investment.

Europe got kicked to the curb.

He was wrong. Yes, Asia has ascended, and China is rapidly becoming one of the most significant economies in the world. But Europe is not an open-air museum.

Support for this is in the numbers, two mainly, currency movements and GDP. If Europe was on the path to becoming one big tourist attraction, GDP growth would have been less robust than in the US, and the currency would have withered when compared to the US dollar.

As regards the GDP annual growth rate since 2000, the US has shown periods of higher annual growth than Europe in 2003 to 2005, 2010, 2011 to 2015, and 2023 to present. All these years together total 10 years out of 25. And the premium growth rate in the US compared to Europe has not been that large.

A better indicator would be the currencies. If Europe was headed for open-air museum status, no one would want to buy the currency. Currencies are a barometer of sentiment towards a country. You can buy currency for yield, for investment in a business, for investment in stocks, for investment in real estate, or for other things that can provide value.

Contrary to conventional belief, people did buy the European currency. From July 2000 until present, the European currency is up approximately 19% versus the US dollar.

Why do we ask this question?

We ask this question to see if the weakening US dollar fundamentals being expressed at present, such as fiscal concerns, bond downgrades, policy uncertainty, and less robust treasury bond offerings, are factors of the “here and now”. Or are they connected to a longer, slower moving deterioration of the US dollar. Perhaps a movement that could put reserve status into question.

Hard to say, and this is not the venue to try and answer it. But, for crypto and stable coin buyers it is important. As we have noted before, with a sense of trepidation, US dollar stable coins are 99% of all stable coins. Europe, Latin America, and Asia all have stable coins, but no one seems to care.

If stable coin investors could see the past trends, which show a slow weakening of the US dollar versus the Euro or the Yen in the past years, combined with the present weakening fundamentals, it is hard to imagine anyone would want 99% of the assets in US dollar stable coin.

So, for stable coin and crypto investors, seek out Euro stable, Asian stable, or Latin stable. Anything but US dollar stable.

And if you go to Europe this summer, museums are private and indoors. Few are open-air.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

It has taken years for Mexico to reduce its percentage of US dollar debt to total debt. US dollar debt as a percentage of total debt is 40-45%, lower than in times past. This is a great success, and Mexico should not stop now.

In the past 30 years, emerging markets have experienced multiple crises, all of which have revolved around currency weakness that had excessive dollar borrowings at their cores. It began in 1994 with the Mexican Tequila crisis and moved on to the Asian and Russian crises in the late nineties. To this day sentiment towards emerging market bonds and stocks is tainted by these crises. Investor memories are long.

The first crisis was the Mexican Tequila crisis. As US dollar borrowing rates were lower than Mexican peso rates in the early nineties, Mexico borrowed a lot of US dollars. Great strategy if dollars are coming into the economy to cover the US dollar debt payments. But a large portion of the dollar flow was from oil sales, and the oil prices were low at about $20 per barrel. Lower oil prices led to lower dollar flows into Mexico, while US dollar borrowings went up.

It was like having a credit card balance and taking a cut in pay or hours worked. Your income is down, but you continue to run up the credit card balance. Sooner or later, unless your pay or hours go back up, you will not be able to pay the credit card bills and may default.

The harsh part for Mexico was when the International Monetary Fund bailed them out with a loan of $50 billion, which was contingent on implementing stringent economic reforms. The Mexican population suffered for years.

Harsh times led to a new commitment by Mexico to increase local currency debt at the expense of US dollar debt. It took years and patience, but it worked; in 1994 approximately 55% of Mexico’s public debt was in US dollars, now, approximately 40-45% is in US dollar debt.

This is great, but it must continue. Mexico should get their US dollar borrowings closer to 40% or below. A higher percentage of local currency bonds will lead to a healthier economy long-term.

How can this be done? Well, the easiest way is to add new products and new investors through the issuance of Mexican peso stable bonds, like those offered by Etherfuse.

Mexican stable bonds can be offered in small amounts, as low as $1.50 which will increase the actual number of investors in Mexican government debt.

At the same time, a peso stable bond offering could attract money from crypto accounts outside of Mexico. It seems to be clear that the US dollar is going to go down in value, and USDC is a risk to stable coins at 99% of the total stable coin market. Investors are looking for alternatives to USDC.

Mexican peso CETES stable bonds are a good alternative. After a rough 2024, the currency is up 9.7% year to date, the highest in eight months, despite all the tariff worries.

The yield on stable Mexican bonds is 6.92% for short-term paper and the token itself has gone up nicely since April, almost 10% in value

Mexico has done a good job of substituting local currency debt for US dollar debt, but there is more to be done. Stable CETES bonds may just be the doctor ordered.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

President Trump’s tariffs have three goals: 1) create an economic situation that encourages investment in US production, allowing for the substitution of imports 2) encourage foreign companies to invest in the US 3) generate tax revenue. The first two have the goal of reducing the US trade deficit the US runs with many countries. The third generates much needed government revenue.

Recently, there was a legal setback on President Trump’s tariffs. Court rulings suspended the bulk of the proposed tariffs; the court ruled the overstepped the test of emergency authority.

As expected, the Trump administration claimed tariffs would go forth. And yes, there are ways tariffs can be implemented that would not be deemed executive branch “overstep”. A short-term law could be used allowing tariffs for 150 days. He could also go the traditional route of seeking congressional approval. It is hard to imagine President Trump has the patience to wait for congress, and 150 days may not be enough.

The other way to achieve an increase in demand for US produced goods and services, and stimulate foreign investment is lowering the value of the US dollar. A lower dollar lowers the price foreign companies pay for US goods, increasing the amount of US exports, and improving the trade deficit. A lower US dollar lowers the cost of investing in the US for foreign entities. A lower cost of investment would probably mean more investment in US projects.

In the end, more US goods are sold to foreigners, and more money comes in for investment. Two problems solved.

The third goal, to increase government revenue is tricky. There is a risk that the US debt limit (ceiling) will be reached soon, meaning unless there is a new ceiling put in place new US debt cannot be issued. Limited funds from tariffs and restrictions on borrowing is not a good combination.

Whether or not a lower dollar is used to make up for the lack of tariff impact, there are still reasons for the US dollar to go down. First, US rates have stayed high, and the US dollar has not gone up in value; if higher interest rates don’t boost the value of the US dollar, what will? Second, foreigners have increased their sales of US treasuries; in March the Chinese cut their exposure noticeably. If a foreign entity sells bonds, they also sell the currency. Finally, the chaotic US policy is holding foreign investment back; if there is no confidence in regulatory clarity, there is less investment

There are probably more reasons than these for the dollar to go down, but it’s a start.

The question is will there be a decline in the dollar or a devaluation. Although they sound similar, they are not. The dollar decline is slow and consistent. Devaluation is sudden and aggressive, often overshooting on the downside.

A steady decline in the US dollar is probably the best outcome. A devaluation is not. Devaluation has a tendency to spoil sentiment for a long time.

Whether it is a decline or devaluation, diversification away from the US dollar probably makes sense. If an investor owns US stable coin it is probably a good idea, if possible, to invest in Mexican stable, Brazilian stable, or Euro stable. Anything but US dollar stable.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

If you buy a house and find out that the foundation needs massive work, or that the roof needs to be replaced, work that is more than a do-it-yourself job, the cost is on you. There is no point in complaining about the seller. It is your problem, and you had better find a way to get the repairs done.

Or you can go on with your life and be in denial, pushing the repairs to the future.

The US economy is like a house with foundation problems. On May 19th Moody’s downgraded US debt from Aa1 to Aaa, a simple “buyer beware” message. Borrowing is a significant portion of the US economic foundation, and the Moody’s downgrade may cause problems.

Secretary Scott Bessent didn’t see it that way, saying it was the fault of the previous administration. It was a very cavalier attitude.

But the financial markets didn’t agree with him. US bond yields went up, prices went down; the 30 year long-bond, the bond used to set mortgage rates, went above 5%, the highest level since 2023. Some investors bought the dip, as many are conditioned to do, so interest rates declined from their peak on Monday May 19th.

It is a mistake to be complacent about the Moody’s downgrade. It doesn’t matter if it was a problem before the Trump administration moved in. It is their problem now. They own it and have to deal with it.

The surprising thing is that after the Moody’s announcement the administration didn’t put forth any changes to their plans. They are still trying to ram through tax cuts, cut government spending, and are holding the line on tariffs. Post the Moody’s announcement there was no alteration to their plans, strange.

If nothing is done, there could be serous problems regarding US fiscal health, the US dollar, and US economic growth.

Higher interest rates increase the US budget cost of servicing debt. One dynamic that can drive US budgeted debt costs higher is foreign investors selling US government bonds. Around the time Moody’s announced its decision, the US Treasury reported that China, the second largest holder of US debt, reduced its holdings in March. If they reduced their exposure in March pre-Moody’s downgrade, what will they do now post downgrade?

Probably sell more.

The US dollar is a concern, too. Rising yields and interest rates normally boost a currency’s value. But on the day that Moody’s announced the downgrade, rates went up, and the US dollar went down.

What explains the declining dollar in a time of higher interest rates? Well, one explanation is a loss of confidence from certain segments of the market, like foreign investors. In many ways, a currency is an expression of confidence, and right now it is hard to argue there is any confidence in the US or the US dollar.

The final concern is how will higher interest rates impact an already questionable economic growth outlook? No one knows the impact of tariffs, and higher interest rates will mean higher costs for credit cards and mortgages, both dynamics that can slow consumption and economic growth. For economic growth, it doesn’t look good.

Fiscal concerns, waning confidence in the US dollar, and economic growth held back by higher rates speak against too much US dollar investment exposure. In short, the US dollar is a risk!

Selling US dollar stable bonds, or fiat for that matter, could be a good idea. Mexican peso stable bonds and Euro are looking good versus the US dollar.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

The argument to diversify out of US dollar stable coin lives on and must be repeated. 99% of anything in an asset class is too much and dangerous.

Given this unhealthy concentration, it is time to start thinking about moving away from dollars, or anything backed by dollars, like US dollar stable coins.

The chorus of dollar pessimists is growing. Well known investor Peter Schiff said” The US dollar is about to free fall. The only way to end America’s massive trade deficit is to end the dollar’s role as global reserve currency.”

Wow! He doesn’t mince words.

It is obvious that the US trade deficit is a problem. To correct this deficit, US exports need to increase, and imports decrease. If tariffs don’t do the trick, if they are too watered down, the dollar will have to devalue, and its role as the international reserve currency may be put into question.

Investors seem to be too complacent regarding risks to the US dollar, despite mounting evidence of weakening almost every day

The dollar view is particularly important for crypto investors in stable coins. Even if no action is taken to reduce dollar stable coin exposure, thought must be given to the possibility of doing something. Investing is about attempting to see the future, the future of a weaker dollar.

Regarding potential targets for US dollar flows, bitcoin and gold seem to make sense.

In sovereign stable coins, Mexican stable seems to make a lot of sense along with Euro, and perhaps Japanese yen.

Of the three, the Mexican peso stands out. The yield is good, the currency is off its low, and the economy has done well in these times of tariff uncertainty.

The yield on Etherfuse Cetes stable bonds is 7.3%, which is 3% higher than yields in the US.

2024 was a bad year for the Mexican peso, declining 19% in value versus the USD. From the start of 2025 to end of March it had a good run versus the dollar. Then, US tariffs were announced and went through the previous low point. It is now around 19.6, 6% up in value from the start of 2025, and about 6% from its low of 2025.

It’s true that a more favorable tariff stance towards auto suppliers, a one-off event, helped numb the sting of tariffs. And yes, President Trump vacillating on tariffs aided the currency too. But a lot of positive sentiment can be ascribed to the economy.

Inflation has been a persistent problem for Mexico and its Central Bank. To counter inflation, the central bank has kept the benchmark rate at a restrictive level of 11%. A restrictive rate did its job; inflation went to 3.59% in January and stayed at about 3.8% in February and March. The April number went up to 3.93%, a smidge below the government target of 4%. Stable to slightly higher inflation in the face of high interest rates shows economic strength.

Along with rising inflation, the Mexican unemployment rate fell to 2.2% in March, compared to 2.3% in March 2024. The 2.2% level was the lowest on record since the series of economic data started in 1994.

Steady inflation and rising employment are good economic signals. And a good economy can support the currency.

Mexican yields are good, and the economy is showing some strength. For those that want to lighten up on US dollars, Mexico may be a good place.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

The US dollar recorded its second consecutive week of gain for the week ending May 2nd. Is this the start of a trend, or time to leave the party, reduce dollar exposure?

To fix the balance of trade between the US and the world, tariffs are the tool of the day. But tariffs are not the only tool that can be used. A US dollar devaluation can do the trick too.

Tariffs discourage consumption of foreign items or imports. Their goal is to stimulate consumption of domestically produced goods, also called “import substitution”.

If tariffs fail to improve the US trade balance, then dollar devaluation may be next. Lowering the value of the US dollar makes US goods cheaper, so foreign buyers buy more. When they buy more, US exports go up, and if that is greater than the growth of imports, the problem may be solved.

The metric to measure whether trade is getting better or not is the US monthly trade balance, the US dollar difference between exports and imports. A surplus (rarely if ever in the US), means more is being sold to non-US entities than being bought from non-US entities A deficit shows the US is buying more goods from outside the US than consumers outside the US are buying US goods.

One year ago, the monthly US Trade deficit was $68.5 billion. In its most recent reading, it was $122.6 bn or a 78% deterioration.

Medium-to-long-term tariffs may do the trick, but we must be prepared for something else-a weaker dollar.

No one should be surprised if the US pursues a weaker US dollar. They have already expressed interest in new programs to lower the dollar, like the Mara Lago Accord. And China is the second largest holder of US debt. If China starts selling their debt and moving back to their currency, dollar watch out.

To show how fierce a dollar decline can be, look at Taiwan. On Monday May 5th the Taiwan dollar went up 5% against the US dollar, the biggest move since 1988 as traders speculated that authorities might allow it to appreciate, to help reach a trade deal with US.

Such US dollar price action is important because US dollar stable coins represent 99% of all stable coins worldwide. Mexico, Europe, Brazil, and Japan have stable coins, but all are rushing to the dollar.

Movement in the monthly trade balance will be the best way to monitor success or failure of tariffs. As noted, the deficit was $122.6 billion in the last month, a 78% increase in one year. But the month before the most recent month the balance spiked to $130.7. There was a rush to buy imports before tariffs hit.

It is hard to exactly measure success in correcting the trade deficit. Is a number below $100, 18% lower the number where victory can be declared? Or is it the trend, three months of improving numbers?

No matter the case, US dollar devaluation may be a tool used to reduce the trade deficit. The mere mention of this, combined with 99% of stable coins being in US dollars, should make people move away from the dollar, start leaving the party.

Perhaps find a new party in Mexico, Europe, Brazil, Japan, or elsewhere.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

Savers are “consumers” that give up present consumption for future consumption. Here, the key word here is consumption. Therefore, savings must be looked at through the lens of a consumer product as opposed to an investment product. To do this correctly, savings products must be developed that make savings easy to access across the whole wealth range of a consumer base. Consumers of savings must have vehicles and structures to save large, small, and micro amounts.

When comparing the US savings rate to other countries, the US fails. In 2024 the personal savings rate was 3.8%, which is lower than the long-term average of 8.56%, and lower than most of the developed world.

The US needs legislation that promotes savings through blockchain and tokenization, NOW. Blockchain and tokenization can make this right.

The US has revolutionized savings through legislation before. First, the Employment Retirement Income Security Act of 1974 (ERISA) created the designated retirement savings account, the IRA. Second, May Day 1975, the day fixed commission on stock trading was abolished, lowered the commission costs on stock trading. Lowering the cost of trading and allowing money to be put away for retirement on a tax deferred basis were a winning combination.

The US government can do it again, if they want to.

Blockchain and tokenization should be the pillars of a new savings regulation. Here are a couple of things that should be done or considered.

First, regulators must stop fighting crypto wallets and embrace them. Realize that they are useful and here to stay. Crypto enthusiasts may bristle at the idea of inviting regulators into the crypto space, but they are needed. Legislation and regulation can create confidence on behalf of the consumer. And, in the end, savers are consumers, and consumers need some sort of protection. The more consumer protection, the more confidence. The more confidence, the more consumption.

Second, regulations must promote diversification of savings. Presently, 99% of stable coins, a key plank in a crypto savings plan, are in US dollar. This is too much, and it is dangerous. Tokenization knows no borders or boundaries, so it is reasonable to craft US policy that allows consumers to save in currencies like the Mexican Peso, Euro, UK Pound, and others. Diversificaiton of savings is key.

Third, regular savings plans, “contractual plans” must be encouraged by regulators. Savings, or consumption of savings products, must become a habit. Blockchain is perfect for fostering a habit among a lot of people, because it facilitates transactions for large to small amounts of money. A regulation that allows for a limited amount of savings to be tax free also makes sense. The amounts involved can be small because the goal of regulation is to foster the habit of savings.

To enact good legislation, regulators must reach out to crypto and tokenization players. The regulatory concepts should spring from those who are involved in the industry. Collaboration will create better regulations.

In the end, we all must realize that savers are more consumers than investors. Savings products are sold and consumed. Presently, there is ample legislation promoting healthy consumption of many consumer products. There should be healthy regulations in the savings space too.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

Crypto seems to be winning its war of acceptance. But is it a pyrrhic victory, a victory that brings harm to the victor, a harm that differs little from defeat?

In times past highly regarded bankers and investors have called crypto a Ponzi scheme, a scam. Banks have threatened their employes with severe actions if they traded crypto. Crypto has had very, very few fans in traditional finance.

The sad truth is that many critics never took the time to really understand crypto. More than one person has claimed that crypto is blockchain. When smart people mix up the road with cars, they have not put much energy into understanding the whole picture.

Even President Trump before he became a meme coin star criticized crypto in harsh terms.

Now that is changing. Larry Fink of Blackrock is touting the merits of asset tokenization for all asset classes. The US Senate confirmed Paul Atkins as the SEC chairman. Paul Atkins is pro-crypto and expected to establish a clear regulatory framework for digital assets.

Encouraged by such appointments, there are reports that US digital asset firms are considering applying for bank charters and licenses, encouraged by President Trump’s favorable stance towards crypto. If licenses are granted, digital asset firms will become mainstream, taking deposits and making loans.

At the same time, President Trump rolled back legislation that would have extended traditional broker reporting standards to crypto, removing headwinds to decentralized finance going mainstream. The ruling passed both chambers of congress.

Regulators are on task too. In a recent speech, FDIC acting Chairman Travis Hill stated: permissible crypto-related activities will generally be treated just like other possible activities.

These are victories for crypto enthusiasts. But are the victories pyrrhic?

If the crypto market expands due to regulation, the token market will grow, and there will be more crypto looking for tokens. If that money goes into meme coins, which express more speculation than savings, and are just collectibles, the crypto victory may be pyrrhic

In many ways, the key driver of meme coins is the “Greater Fool Theory” which says that investors make money by buying overvalued assets because there is someone willing to pay a higher price. Meme coins have no assets, so in a respect any price is overvalued.

How can we stop a proliferation of the “Greater Fool Theory”, which sows the seeds of disaster as investors clamor for price momentum-based assets? Remember, we have already witnessed meltdowns in some meme coins.

The answer is to promote, at both the industry and government levels, stable coins and bonds. Stable coins and bonds from Mexico, Brazil, UK, Europe, Asia, and other regions should be available to investors worldwide, no bias regarding where the investor resides. Promoting these assets globally will hopefully shift some money away from meme coins and other less stable assets.

If the crypto battle is won and an asset class, driven by the “Greater Fool Theory” dominates, meme coins, the victory will have been pyrrhic.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

Kansas was a safe place for Dorothy, but a twister turned her life upside down. A twister dropped her into Oz, a land full of threats, forcing her to set upon a treacherous path to get home again, besieged by witches, talking trees, and poppies.

Metaphorically, US Bonds and the US dollar have just experienced a twister and landed in an Oz-like setting. Until recently the US dollar and bonds enjoyed a peaceful haven status, like Dorothy in Kansas. Now, that status is challenged. In the last week, the DXY dollar index is down 3.6%, and US Treasury ten-year yields hit 4.8% .

Will the US find a “yellow brick road” and a benevolent wizard at the end? Too early to tell.

Jim Grant, founder of Grant’s Interest Rate Observer, summed it up best.

Treasuries and the dollar get their strength from “the world’s perception of the competence of American fiscal and monetary management and the solidity of American political and financial institutions,” said Jim Grant. “Possibly, the world is reconsidering,” he continued.

Is a policy that levies tariffs one day and removes them the next expressing competence? One might say it expresses chaos not competence. Bond and currency investors do not like chaos, never have, and never will.

Back to Oz. The wicked witch of the west was Dorothy’s biggest threat, and China could be that for the United States. The witch stopped Dorothy’s path with poisonous poppies; the Chinese could take money from US bonds and slow the US economy along its path. China is, after all, the second largest holder of US debt. In times like these you do not want your second largest bond holder selling.

Evidence that the US standing in financial markets is under threat can possibly be seen by looking at Europe. In the last week US Treasuries underperformed German government bonds (Bunds) by the most since 1989; the yield on US debt surged more than .5% and Bunds were unchanged. German bunds may be becoming the “go to asset,” the haven, a quasi Kansas.

The Euro’s move supports this assertion. The Euro hit its strongest level in three years, and has had the fastest rally in a decade and a half. A strong Euro is surprising because European ten-year bonds yield about 2.5% versus 4.43% on US ten-years. Put another way, investors are willing to “give up” more than two percentage points of yield to be away from the US dollar.

The Euro is presently around 1.13, with 1.14 being a three year high, and now there is talk that it is going to 1.20 versus the US dollar.

So, what could be done from an investment standpoint?

For starters, lowering US dollar exposure may make sense.

USTRY Etherfuse stable bonds yield 4.17% API, and EUROB yield 2.17%. At present you get 2% more yield in the USTRY stable than in the EUROB stable. For this trade to hold the US dollar cannot weaken more than 2% against the Euro. Presently the Euro trades around 1.13 versus the US dollar. If it goes down to 1.11 to the US dollar, favoring Euro stable bonds over US makes no sense.

But we have seen that the US dollar is showing weakness, and there are now predictions of 1.20. Even if it is only half that move, a move to 1.14, it is still better to be in Euro.

The US economy has a long road ahead of it, and it will probably not be paved with gold.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.

James Carville in 1992 said “The Economy, stupid”. Substitute the word “policy” for “Economy” and you might sum up the present situation in the United States. Inconsistent policy has many people concerned about the US dollar and the US fiscal position.

Oak Tree co-Chairman Howard Marks, a great credit investor, summed it up best, “If people don’t like the dollar, don’t like investing in the US, don’t want to hold an unlimited number of Treasuries; if we just make people mad,” Marks said, “the fiscal situation will be very complicated.”

Let’s take this statement apart piece by piece. It’s a good one.

First, due to policy inconsistency people don’t like investing in the United States at present. Without trust and consistency in policy, investors are hesitant to take the risk of owning the barometer of US policy, the dollar. Tariffs one day, a 90 day reprieve the next hardly builds trust and confidence.

Further to that, hedge fund titan Ray Dalio in a Bloomberg interview said, “It dramatically affected psychology and attitude about the United States reliability”. This kind of “says” it all.

Second, people are cautious about holding US Treasuries. The US Treasury has long offered more yield than the Euro and the Japanese Yen, the other major global currencies. Add to this the demand that comes from the US dollar being the reserve currency of choice, and you have demand for US bonds and the dollar.

But now, versus the Euro the US dollar only offers 1.2% more yield on a ten-year bond. Is 1.2% more worth the risk of holding the US dollar, with all the factors driving US risk up? The US dollar could easily go down in value over 1% versus the Euro, wiping out the interest rate pick up.

In short, given the Euro potential to go up,getting paid 1.2% for US dollar risk may not make sense.

Third, the US government is making people mad. This is self-explanatory.

Fourth, the fiscal situation, government spending and budget policies, are complicated. The US national debt is projected to be over 100% of GDP. The US administration claims that a slew of tax cuts will stimulate business, and more business will lead to more tax revenue. Theoretically, this could happen, but it is a risky bet.

So, given the headwinds to demand for US dollars and US Treasuries from foreign investors, where is a good place to invest?

Two currencies that may answer this question are the Euro and the Mexican peso. Both currencies can go up in value versus the US dollar, especially with watered down tariffs.

CETES stable bonds offered on Etherfuse yield approximately 7.5%, which is a 3.3% yield pick up versus the US Etherfuse stable bond. The yield on Etherfuse Euro stable bonds is 2.14%, 2.03% less than the USTRY Etherfuse bond. On a 60% allocation to the peso and a 40% allocation to Euro, the yield pick-up versus the US is 1.2%.

To highlight the potential of European bonds, we can look at German Bunds, German treasury bonds, versus US Treasuries in the week ending April 11, 2025. In that week, US treasuries experienced their worst weekly performance versus German bonds since 1989. If this can happen in Germany, it can happen in Europe.

Money could leave the dollar unless things become clear regarding US policies on fiscal and trade matters. For, after all, it really is “policy, stupid”.

This blog is for educational and informational purposes only, covering general market trends, industry developments, and asset features. Nothing herein is investment advice, a solicitation, or a recommendation to buy or sell any assets. Etherfuse and its guests may hold stakes in some or all of the assets discussed.