by Michael Snyder, The Economic Collapse Blog:
For decades, the dominance of the United States has been primarily based on the strength of the U.S. dollar. Having the main reserve currency of the world has meant that everyone else has wanted and needed our currency. In fact, our currency is our number one export. Most Americans don’t realize this, but far more dollars are used outside the United States than are used inside the United States. Having such a strong currency for such an extended period of time has allowed us to enjoy a standard of living that is far beyond what we actually deserve. So what is going to happen now that the rest of the world is starting to move away from the U.S. dollar?
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In 2025, the value of the U.S. dollar declined precipitously. The U.S. dollar index was down about 10 percent for the year, and in recent days that decline has continued.
Now China has decided to pour fuel on the fire.
It is no secret that our relations with China have been going downhill. The Trump administration doesn’t like China, and China doesn’t like the Trump administration. In recent months both of them have been implementing measures that are intended to do economic damage to the other side, and here in early 2026 it appears that things are going to an entirely new level.
On Monday, we learned that authorities in China have instructed Chinese banks “to rein in their holdings of US Treasuries”…
Chinese regulators have advised financial institutions to rein in their holdings of US Treasuries, citing concerns over concentration risks and market volatility, according to people familiar with the matter.
Officials urged banks to limit purchases of US government bonds and instructed those with high exposure to pare down their positions, the people said, asking not to be identified discussing private deliberations. The directive doesn’t apply to China’s state holdings of US Treasuries.
Communicated verbally to some of the nation’s biggest banks in recent weeks, the guidance reflects growing wariness among officials that large holdings of US government debt may expose banks to sharp swings, the people said.
It isn’t as if the Chinese are suddenly selling everything.
But without a doubt, this is a major signal.
The Chinese are letting their financial institutions know that it is time to start moving in another direction, and the rest of the world is definitely going to take notice.
The Trump administration is going to take notice as well, because Trump administration officials have been very sensitive about “how foreign investors behave toward U.S. assets”…
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