In the past two weeks, we’ve stepped through the tailwinds building for stocks, just as we’ve made new record highs in the major indices.

The resumption of the Fed easing cycle is nearing.  The extension of pro-growth tax cuts should be just weeks away.  The Fed has finally acknowledged the liquidity constraints its bank regulations have put on the U.S. Treasury market — and they’ve vowed to relax those constraints, and soon (regulatory relief!).  

Add to all of this, from last week’s NATO meeting we now have an historic structural shift in Western world military spending and alignment.

And the technology revolution continues to advance at a rapid pace.

The question is, could the self-imposed deadline on the 90-day tariff pause introduce another confidence shock?

That said, over the past several months, it has become clear that Trump can turn the dials at will — to manage economic and financial market stability.  And markets now seem to be recognizing that/ pricing it in. 

Add to this, last week’s NATO Summit (the big defense spending commitments) may end up playing a big role in the resolution of tariff negotiations. 

Remember, back in April we talked about Trump’s Chairman of the Council of Economic Advisors — a guy named Stephen Miran.  He wrote a report on “Restructuring the Global Trading System” in November of last year.  A month later, Trump picked him to be his top economist.

This report is the blueprint for leveraging tariff threats, and the United States’ role in global security and financial stability, to extract “burden sharing” from our allies and trading partners. 

In this case, the dollar’s role in the world as the reserve currency provides benefits to the world, and benefits to the U.S. but also drives persistent and unsustainable U.S. trade deficits.

So Miran’s message for trading partners was simple: Share the burden. That means accept tariffs, or… open your markets, spend more on defense, buy more American goods, invest in U.S. manufacturing, and buy our Treasuries.

We heard from the Fed today.

They held rates steady again.

And for the second time in a row, in their Summary of Economic Projections, they revised growth DOWN and inflation UP.

And while the median projection for rate cuts by year-end was unchanged at 50 basis points (two cuts), the weighted-average target from the 19 Fed officials is now 4.04%.  This tells us the consensus Fed expectations are actually closer to just one cut this year, not two.

Let’s talk about the dollar.

Yesterday, ECB President Christine Lagarde wrote a piece in the Financial Times arguing the dollar’s days of global dominance are ending, and making the case for the euro to gain prominence, “the global euro moment.”

China’s head central banker followed today making a similar case: the dollar’s reign is ending, and alternatives like the digital yuan are rising.

The timing is no coincidence.  This is a direct response to the legislation passed today in the U.S. Senate.  And it has everything to do with dollar stablecoins.

With that, let’s revisit an excerpt from my note last month on this …

The U.S. is working on a solution that will create a distinct edge, relative to the rest of the world, in ensuring robust demand for its debt.

The solution:  private, regulated, Treasury-backed dollar stablecoins.

The legislation on this will 1) shore up the dollar’s dominance in the world, AND 2) create a brand new, and very deep source of demand for U.S. Treasuries. 

Not only will this move by Congress ensure the dollar remains the world’s reserve currency, but the dollar will become the world’s digital reserve currency. 

So, people, businesses and governments from around the world will be able to own U.S. dollar stablecoins (effectively holding U.S. dollars) without the friction of opening a U.S. bank account or going through the U.S. financial system.  They get instant and virtually free (no wire fees, no spreads) access to the stability, trust and liquidity of the dollar. 

Through the dollar stablecoin, exposure to the dollar becomes instant, cheap and borderless.

Now, some important context:  Core to the Trump economic policy platform has been these three explicit actions:  1) lift restrictions on American energy production, 2) terminate the Green New Deal initiatives within the Inflation Reduction Act, and 3) oppose the creation of a central bank digital currency (CBDC).

As we’ve discussed here in my daily notes, the trading of global oil in U.S. dollars (“petrodollars”) has been the cornerstone of the dollar’s role as the world reserve currency, since the end of the gold standard.

And the world reserve currency status has been key in building and sustaining the United States’ position as the economic superpower.

That’s why the anti-oil policies of the Biden administration were an assured path to loss of reserve currency status of the dollar, and therefore a loss of wealth and power for the country.

So, the anti-oil policies are being reversed.  That, and this stablecoin legislation, disrupts years of globally coordinated efforts to shift the monetary system toward CBDCs and transform the global economy under the climate agenda.

That’s likely why we’re hearing from central bank heads in Europe and China.

Trump is blowing the plan up.

What’s the difference between a stablecoin and a CBDC?

A CBDC is issued and controlled directly by a central bank — it’s programmable, surveilled, and designed to displace the private banking system. It’s centralized monetary control.

A private, regulated dollar stablecoin, is issued by private entities (like fintechs), fully backed by U.S. Treasuries (1:1), and operates on open blockchain networks.  It’s about market freedom, privacy, and competition.

The dollar stablecoin will strengthen the dollar and strengthen the solvency of the United States.  Stablecoin companies will bring trillions of dollars of new demand to the Treasury market.