The dynamics of the global economy are shifting markedly, particularly concerning the dollar's position amidst a growing trade deficit in the United StatesAs of January, the dollar index surged past the notable 105 mark, simultaneously achieving a remarkable global payment share of 51.23%. This stark juxtaposition highlights an inherent paradox: while the U.S. faces an expanding trade deficit that has persisted for 27 months—potentially reaching an all-time high—the dollar’s penetration in global financial transactions is soaring to levels not seen since the collapse of the Bretton Woods systemThis disconnect between the tangible economy and the power of currency signifies a profound evolution in the underlying mechanics of international finance.

Interestingly, traditional perspectives on the dollar system's resilience may be overly simplisticEven with American goods contributing a diminishing share to the global market—plummeting from 11.7% in 2008 to a mere 8.2% today—the United States maintains a commanding influence over the global financial landscapeIt commands 58% of international bond issuances, 42% of derivatives trading, and accounts for a staggering 63% of cross-border capital flows

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This phenomenon of "de-trade-ization" of the dollar pivots on a new financial imperialism, underpinned by America's dominance in technology.

Tech giants, epitomized by companies like NVIDIA, are now central to this monetary modelThe market capitalization of NVIDIA has exploded to over $2.5 trillion, significantly driven by the burgeoning interest in artificial intelligence, particularly following the advent of ChatGPTIts H100 chip now represents an astonishing 78% share of the global AI computing power marketThis technological monopolization has engendered a unique "tech dollar" cycle: businesses globally require dollars to access computing resources, thus fostering a robust demand for U.S. treasury bonds to sustain the dollar’s creditworthinessThis chain reaction ultimately establishes a closed loop circumscribed by "monopolistic technology - currency demand - debt cycle."

The implications of this financial paradigm are evident across European markets, where its impact becomes pronouncedFor instance, by the first quarter of 2025, the German DAX index had rocketed by 18%, a stark contrast to the country’s GDP growth of only -0.3%. An unusual case occurred with Volkswagen, which reported losses due to a shrinking market share in China, yet still saw its stock price swell by 45% due to anticipated transformations linked to AISuch manipulation highlights how financial capital is suffocating industrial capital, indicating that Europe is morphing into a mere shadow of the American stock market.

Despite the sharp rise in equity prices, the American stock market is tangled in structural metamorphosisFebruary 2025 data indicated that retail investors accounted for 38% of daily trade volume—the highest percentage since the catastrophic market crash of 1987. Platforms like Robinhood report that accounts holding NVIDIA shares have surged to over 12 million, marking a staggering 240% increase since 2023. This scene of everyday Americans engaging vigorously in stock market trading draws haunting parallels to the market conditions preceding the Great Depression of 1929.

Simultaneously, the withdrawal of institutional investors has exacerbated the imbalance within the market

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Financial powerhouses like BlackRock and Vanguard have collectively divested $48 billion from tech stocks in the last six months, instead opting to increase their stakes in gold and Japanese yen assetsReports from Goldman Sachs indicate that hedge fund positions in the Nasdaq 100 are seeing the highest level of net short positions since 2011. This turmoil reflects an intense power struggle between "smart money" and "retail power," potentializing a shift in the fundamental rules governing market pricing.

Technological indicators are beginning to manifest classic signals of market toppingFollowing NVIDIA's “death cross” on February 15 (the 50-day moving average dipping below the 200-day moving average), its stock managed a remarkable recovery with ten consecutive gains, although trading volume contracted to 42% of its peak levelHistorically, this “low-volume rise” pattern has only occurred on three previous occasions, which were incidents corresponding with the dot-com bubble of 2000, the mortgage crisis of 2007, and the GameStop phenomenon of 2021.

Additionally, signs of a technical top for the dollar index are emergingWith the Federal Reserve halting its consecutive rate hikes—totaling 14—the actual interest rates have begun to fall below neutral levelsMost telling is the data indicating that global central banks net purchased 1,275 tons of gold in 2024, with an additional 345 tons acquired in January 2025, setting a single-month record not seen since 1967. This "de-dollarization" trend could potentially destabilize the foundational credibility of the dollar.

It is critical to note that the deterioration of U.S. economic fundamentals is occurring at a pace that surpasses expectationsThe core PCE price index for Q1 2025 marked a year-on-year decrease to 1.8%, falling below the 2% target set by policymakersAs the yield on 30-year Treasury bonds surpassed 4.5%, interest payments on federal debt now constitute 12% of the fiscal budget, amounting to expenditures equivalent to the entire research and development funding for Silicon Valley annually

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Such a "debt-deflation" spiral is gnawing at the economic foundations that support the dollar’s credibility.

The potential collapse of the U.S. stock market may trigger a chain reaction within the global financial systemCurrently, the price-to-sales ratio of the S&P 500 stands at 3.2, significantly above the peak of 2.8 recorded in 2000. If valuations adjust back to historical averages, the result could yield a staggering evaporation of $15 trillion in wealth—equivalent to the combined GDP of Germany and JapanSuch a shockwave would transmit through pension systems, affecting the tangible economy and likely repeating the "lost three decades" experienced by Japan in the 1990s.

Moreover, the leverage risks within the financial derivatives market are particularly alarmingReports from the CME indicate that the total open contracts in NVIDIA’s options market have reached $87 billion, with a vast majority—78%—represented by out-of-the-money call optionsThis "doomsday gamble" positioning could evoke a sell-off reminiscent of the 1987 "portfolio insurance" eventIn moments of liquidity crunch, the hedging activities of market makers might amplify single-day drops of stock prices by more than 20%.

Drawing lessons from history serves us well to remain vigilantPrior to the Plaza Accord in 1985, the dollar index found itself consolidating at high levels, while the U.S. stock market was engulfed in “irrational exuberance.” When the Bank of Japan initiated sales of American bonds, it triggered a rapid market decline of 36% within just three monthsPresently, the proportion of the dollar in global central bank foreign exchange reserves has dwindled to 58.4%, reaching a 25-year lowIf this trend of reduction accelerates, the collapse of the dollar system could unfold more swiftly than initially anticipated.

As the sun sets on dollar supremacy, the dawn of a new monetary system has yet to unfoldWith retail investors using mobile apps to trade U.S. stocks, they may find themselves witnessing the end of an era

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