When people talk about “currency wars,” it sounds like some abstract game economists play in far-off boardrooms. But it’s not. It’s real, it’s happening now, and it affects every investment decision we make.
Here’s the simple rule: no country actually wants a strong currency for long. Why?
A strong currency makes exports more expensive.
It slows growth.
It makes paying off debt harder.
A weaker currency, on the other hand, helps sell more goods abroad and makes debt easier to handle. In today’s debt-soaked global economy, that’s the game everyone is playing.
This isn’t theory. It’s history. When growth slows, central banks cut interest rates and weaken their currencies. When inflation rises, they do the opposite and try to strengthen them. But when everyone cuts rates at the same time? That’s a currency war — a race to the bottom. And that’s where we are today.
The Dollar vs. the Yield Curve
The chart above has two halves:
Top half: the U.S. Dollar Index ($DXY).
Notice the green arrows. Each time interest rates tighten (meaning money is expensive to borrow), the dollar gets stronger.
Bottom half: the Yield Curve (3-month vs 10-year yields).
When the blue line goes down (red arrows), short-term rates are higher than long-term ones. That’s called an “inversion,” and it’s a warning sign that money is too tight and the economy is under stress.
Here’s the cycle, in plain English:
The Fed raises rates → yield curve flattens → dollar strengthens.
We’re in stage two. The yield curve has bottomed and is steepening. That doesn’t mean growth is exploding. It means short-term rates are about to get cut. And that steepener is a flashing warning sign: the dollar is in trouble.
Global Rate Cuts
Each peak is when central banks around the world have slashed interest rates at the same time.
2009: 249 cuts during the financial crisis.
2020: 196 cuts during COVID.
2025: 168 cuts in the past year.
That’s not what “everything is fine” looks like. That’s what panic looks like. Policymakers everywhere are racing to weaken their currencies — faster than the next guy.
What Happens When the Dollar Falls
A weak dollar doesn’t exist in a vacuum. It triggers chain reactions:
Commodities rip higher. Gold, silver, copper, grains, meats, and energy all rise. They’re priced in dollars, so when the dollar falls, it takes more dollars to buy them.
Emerging markets breathe easier. Weaker dollars make it cheaper for countries to pay back debt that’s borrowed in dollars. Money flows into EM markets.
U.S. assets rotate. Strong dollars favor big U.S. tech. Weak dollars fuel small caps, cyclicals, and commodity producers.
That’s why a weak dollar is like pouring gasoline on a commodity bull market.
The Endgame: Gold
In every currency war, there’s one winner: gold.
Gold isn’t anyone’s liability.
Gold can’t be printed.
Gold holds its real value while paper currencies get destroyed.
We’ve seen this before.
In the 1970s, dollar weakness drove gold up 20x.
In the 2000s, another weak dollar cycle fueled the last great commodity boom.
Today, the pieces are lining up again.
Why This Matters for Investors
The dollar was strong during the tightening cycle. That phase is ending.
The yield curve is steepening — that’s the setup for dollar weakness.
Global central banks are cutting rates at a pace we haven’t seen since 2009.
If history rhymes, we’re just in the early innings of another commodity and precious metals boom.
Bottom Line
The currency war is here. The U.S. dollar is rolling over as the yield curve steepens. Central banks are cutting rates like it’s 2009. That’s not a backdrop for deflation. It’s the setup for another global reflation wave.
And in currency wars, the only way to win is to own the things they can’t print:
Gold. Silver. Commodities. Real assets.
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