Author: Ding Ping
A systemic "great devaluation" is sweeping the world on an unprecedented scale, and its eye is the Federal Reserve in Washington.
This institution, once considered a stabilizer of global finance, has paradoxically become an accelerator of this devaluation. The pressures it faces are far from ordinary—
to the left is the abyss of resurgent inflation, to the right is the precipice of economic recession, and at its neck is a sharp knife from the White House. This dismal scene, beset by internal and external pressures, precisely echoes the predictions made years ago in a book titled "The Great Devaluation." When economist Daniel Baratta predicted a "debt bomb" and a "crisis cycle" in this book, the market dismissed it as yet another example of alarmism. But today, we are horrified to discover that it wasn't a prophecy, but a pre-written scenario. The core of the massive devaluation of US dollar assets lies in the collapse of the authority of rule-makers and the dysfunction of the system, which in turn will impact the wallets of every ordinary person. So, how can we preserve our leverage in this "great devaluation"? We are in the midst of a systemic "great devaluation" led by the US dollar, and stubborn inflation is the most direct manifestation of this devaluation. The US CPI data for June 2025 showed that inflation had rebounded to 2.7%, and the core PCE price index was also stubborn, at 2.7% in May. More importantly, the Trump administration's tariff policy is widely seen as an inflation accelerator, potentially dragging the entire US economy into a quagmire of "stagflation" by raising import costs. This means that every dollar is depreciating at an accelerated rate. Even more fatally, this devaluation is almost irreversible. What exactly has sentenced the dollar's devaluation to a "death sentence"? The answer lies in another of Baratta's predictions: runaway sovereign debt. Baratta once predicted that the US national debt would reach $50 trillion—a claim that seemed like fantasy at the time. But now that US debt has already surpassed $36 trillion, we have to admit that this prediction is no longer far-fetched. What is driving this figure so rapidly? It's runaway fiscal discipline. In the first six months of fiscal year 2025 alone (October 2024 to March 2025), the federal government's deficit exceeded $1.3 trillion, equivalent to printing over $7 billion in debt every day. But even more deadly than the sheer size of the debt itself is the interest it pays. This annual interest payment, exceeding $1.2 trillion (Deutsche Bank estimates that US Treasury interest could exceed $1.3 trillion this year), has even surpassed the US defense budget to become the fastest-growing expenditure in the federal budget. It creates no value, makes no investment in the future, and serves only to prolong the life of the ever-increasing debt. The trigger for this bombshell is already imminent. In 2025, $9.2 trillion in Treasury bonds will mature, representing a quarter of the total. In the current high-interest rate environment, every attempt to borrow new to repay old debt is tantamount to drinking poison to quench thirst, with costs escalating dramatically. Some hope that the US dollar stablecoin market can provide a "blood transfusion" for US debt, but this is unrealistic. The $250 billion in stablecoins is a tiny fraction of the total US Treasury debt (over $36 trillion). Even more fatal is the fundamental misalignment in demand structure between the two: what the U.S. Treasury market lacks most is long-term "ballast" funds willing to hold for ten or twenty years, while stablecoins provide only short-term liquidity. This structural contradiction ensures that stablecoins cannot be a savior for U.S. Treasury bonds. Meanwhile, official actions are adding fuel to the fire. The Big, Big Act, signed in July 2025, directly raised the debt ceiling by $5 trillion. According to sober estimates by the Congressional Budget Office (CBO), this means the United States will incur over $3.4 trillion in new debt over the next decade. As Barata noted, as government debt piles up, the motivation for interest rate cuts is no longer pure. It's not only a tool to stimulate the economy but also a "painkiller" to alleviate the pressure of massive interest payments on the national debt. Especially given the pessimistic outlook for the US economy, any tightening policy to curb inflation could potentially lead to a hard landing. However, interest rate cuts come at a significant cost, tantamount to "printing money," further diluting the dollar's purchasing power. This devaluation not only erodes the dollar's purchasing power as a currency, but also undermines the foundation of its credibility as a global hegemon. The first manifestation is the collapse of institutional credibility: a central bank, supposedly independent, has become a battleground for political infighting. The independence of the Federal Reserve, once considered a cornerstone of financial stability in the United States and even globally, is now crumbling under political pressure. President Trump's ongoing pressure on the Fed is the most open and intense in recent decades. Trump has repeatedly expressed his dissatisfaction with current Chairman Powell. Recently, Republican members of Congress have even launched a judicial investigation, citing "overspending" on the Federal Reserve building renovations, in an attempt to build evidence of Powell's misconduct. Although Powell firmly stated that the law stipulates that the Fed chairman can only be fired for cause, not policy differences, and that he will not resign voluntarily, this blatant political attack has seriously disrupted market expectations. The market has also realized that current Chairman Powell has been "sidelined" or marginalized. Therefore, investors will shift their focus to the policy direction of the next chairman and begin to price in this. Federal Reserve Board Governor Waller, who recently publicly expressed her willingness to accept the nomination, as well as potential candidates like Kevin Hassett, are seen by the market as candidates more inclined to meet the president's demands for rate cuts. When "political loyalty" is prioritized over professional judgment, the century-old tradition of central banking is effectively dead. JPMorgan analysts have also revealed the truth behind the emperor's new clothes: the Federal Reserve's independence has always been a "myth" to be admired. What mission can a Federal Reserve firmly shackled to political constraints have? Baratta's warning about its becoming a "spokesperson for interests" no longer sounds like a warning, but an accurate description of the facts. Secondly, there is the collapse of global consensus: the "de-dollarization" movement is voting with one's feet. The United States is now like a reservoir dam with structural cracks. No matter how much surface reinforcement is applied, water loss is inevitable. Consequently, we see the outside world responding with action: the world's largest creditor nations are systematically replacing dollar reserves with gold, and a growing number of bilateral and regional trade flows are bypassing the dollar system. Regarding reserve assets: Global central banks are increasing their gold holdings with unprecedented enthusiasm. Data from the World Gold Council shows that net purchases exceeded 1,000 tons for the third consecutive year in 2024. Entering 2025, despite high gold prices, the gold-buying trend continues. The People's Bank of China has increased its gold reserves for 18 consecutive months, while countries like Poland, Turkey, and India have also become major gold buyers. In contrast to the increase in gold holdings, some countries are reducing their holdings of U.S. Treasury bonds. For example, China has been reducing its holdings of U.S. Treasuries for several consecutive months. Although overall data shows that foreign investors' total holdings of U.S. Treasuries are still rising, this is largely due to tactical activities such as short-term interest rate arbitrage. At the payment system level, alternatives, such as the Cross-Border Interbank Payment System (CIPS), are emerging. In the first quarter of 2025, CIPS processed a total amount of 44.25 trillion yuan. Faced with the overwhelming momentum of "de-dollarization," the U.S. dollar system itself is seeking solutions, and the most effective currently is the U.S. dollar stablecoin. While it can slow this trend in the short term, it's ultimately only a temporary solution. The fundamental reason for the global desire to de-dollarize is distrust, not inefficiency. The US's attempt to address a trust crisis with technological efficiency is unrealistic. In the long run, this will incentivize countries to accelerate the launch of their own digital currencies, ultimately fostering a more diversified monetary system. Therefore, when the "trust-reserve-settlement" triangle that underpins the dollar's hegemony is eroded, the ultimate manifestation will be a reset in the value of dollar assets—potentially a structural shift more profound than any simple exchange rate adjustment in history. How can we navigate this "great devaluation"? Barata's other assertion points to a grand paradox that has persisted for nearly a century: the solution to every crisis often inherently lays the groundwork for the next one. The crisis of the 1930s gave rise to the large-scale practice of Keynesianism and government intervention. Decades later, excessive intervention and welfareism laid the groundwork for stagflation. The solution to the 2008 financial tsunami—zero interest rates and quantitative easing—directly led to the global asset bubble and wealth disparity since 2020. The unprecedented fiscal stimulus and monetary easing implemented to respond to the impact of the epidemic have brought us a new problem—stubborn inflation. Protectionist trade policies in 2025 add a new variable to this complex inflation equation, potentially pushing up costs on the supply side and making the problem even more complex. The cycle of history becomes clear at this moment: policy mistakes trigger crises, and the policies that respond to them sow the seeds of the next crisis. As the central executor of this system, every decision the Federal Reserve makes today is inevitably constrained by the policy consequences accumulated over decades. This tells us that the first chapters of all past investment textbooks are now obsolete. When the rule-makers themselves repeat history's mistakes, those who blindly follow the old rules are destined to become "collateral damage." So, how can ordinary people avoid being ripped off in this "great devaluation"? First, don't put all your eggs in one basket. The global multipolar landscape is irreversible, which means the era of solely betting on US dollar assets is over. We should also focus on areas of low value, such as some core assets in A-shares and Hong Kong stocks, as well as non-US currencies that have benefited from the "de-dollarization" trend. Second, our investments should be anchored in scarcity. In an era where fiat currencies are gradually losing credibility, what is the true anchor of value? The answer is not infinitely reprintable paper money, but rather irreplaceable scarcity. This is precisely the fundamental logic behind gold's ability to navigate cycles and combat inflation—the more global inflation, the better for gold prices, because fiat currencies can be printed in vast quantities, but gold cannot be "printed" at will. The same logic applies to commodities. When global inflation rises, the prices of industrial metals like copper and aluminum, as well as energy resources like oil and natural gas, tend to rise accordingly. The reason is simple: they are fundamental resources for production and daily life in modern society. Their supply is inelastic (for example, investment cycles are long), but demand is relatively rigid, enabling them to effectively maintain and increase their value during periods of inflation. In the digital world, Bitcoin's total supply is capped at 21 million, fixed and irrenewable, making it a symbol of digital scarcity. Despite this inflation-proof nature, Bitcoin is not a safe haven to be blindly invested in. Its extreme price volatility and regulatory uncertainty make it a significant investment risk. So, do relatively stable stablecoins have the potential to become a new anchor of value? The answer is no. The core value of stablecoins is by no means a "digital utopia" independent of sovereign credit. They simply provide a "digital skin" for the US dollar on the blockchain, providing first-class global liquidity. Their only trust anchor remains the US dollar itself. When the entire fiat currency system, especially the credit of the US dollar, truly collapses, stablecoins will not be safe either. The end of an era is inevitably accompanied by tremendous pain and challenges. But for the few who can see through the game and plan ahead, this is both a crisis and an opportunity.A case involving digital collectibles surfaced, shedding light on a deceptive fundraising scheme. Unaware bidders, lured into impulsive investments, found themselves unwitting participants in a pyramid scheme. 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