Why the Dollar Must Fall by 50% Soon

On January 29, 2026, exactly at 2:37 PM Eastern Time, the New York Fed did something it hasn’t done in over 40 years. It conducted a so-called raid check with the largest currency traders on Wall Street. For most people, this sounds like bureaucratic routine: a few phone calls, a few numbers, nothing earth-shattering. But for those who understand how the global financial system really works, this moment was the starting signal for the largest coordinated currency maneuver since 1985.

When I heard this term, raid check, during a conversation last week with an old contact from banking, I immediately felt my stomach tighten. I know this feeling. It’s the same feeling I had before Lehman Brothers collapsed. A raid check is not harmless phone calls. It is the way central banks discreetly probe the market before launching a massive intervention. They call Goldman Sachs, JP Morgan, Citigroup, and they ask: What would it cost if we wanted to sell a billion dollars today? Ten billion? A hundred billion? They test liquidity, they measure market depth, and they prepare the ground. For what? For what went down in history as the Plaza Accord in 1985 and is now returning in an even more dramatic form.

Let me explain why this seemingly insignificant call from the New York Fed will shake the foundation of your wealth, why the dollar, which has been the undisputed world reserve currency since World War II, is facing the largest controlled devaluation in its history, and why the United States of America has no choice but to go exactly this route. The story does not begin in 2026; it begins on September 22, 1985, at the Plaza Hotel in New York City. On that day, the finance ministers and central bank heads of the five largest industrial nations of the world gathered: the USA, Japan, Germany, France, and Great Britain.

Their problem was simple but existential. The dollar was too strong, far too strong. American exporters were being undercut in global markets because their products had become unaffordable. The U.S. trade balance showed a historically unprecedented deficit. American industry was bleeding out. During my time as a junior trader in Frankfurt, I still saw the aftereffects of that era, old traders telling stories of the wild days of the eighties when exchange rates moved by 30 percent within weeks. So these five nations decided to do something radical: they would jointly intervene to systematically weaken the dollar. Not through market processes, not through natural adjustments, but through coordinated massive currency sales. The Plaza Accord was born.

Within two years, the dollar lost 50 percent of its value against the yen, almost as much against the Deutsche Mark. It was not a crisis, it was not a collapse; it was a surgical, precise, orchestrated devaluation, a soft default through the back door. Now, in January 2026, we are facing an almost identical constellation, only that the numbers today are not measured in billions but in trillions. The national debt of the United States is 36 trillion dollars. The budget deficit is nearly two trillion per year. Interest payments on this debt have just surpassed defense spending and have become the largest single item in the federal budget.

Let that number sink in. The U.S. spends more money on interest on old debt than on its entire military might. Mathematically, this situation is no longer manageable. Even if the U.S. had a balanced budget starting tomorrow, which is politically completely impossible, the debt burden would continue to grow due to compound interest. At an average interest rate of four percent, that means an additional 1.4 trillion dollars in debt per year just from interest. That is more than the entire gross domestic product of Mexico, automatically every year, without a single dollar being spent on infrastructure, education, or health.

In the evenings at my desk, when I study the Fed’s balance sheets, I often wonder how long smart people in Washington believed they could keep playing this game. The answer is: they never believed it. They were just waiting for the right moment, and that moment is now. The only way out of this mathematical impossibility is a massive devaluation of the debt through currency devaluation. If the dollar loses 50 percent of its value against all other currencies, the real burden of dollar-denominated debt is automatically halved. A trillion dollars in debt from 2025 would only be worth 500 billion in real purchasing power. This is not a theoretical thought experiment. This is exactly what happened in 1985, and it is exactly what will happen again now.

But such an operation cannot happen chaotically. It must be controlled, coordinated, and communicatively prepared. This is where the three phases come into play. Phase one is called jawboning, which is financial jargon for verbal interventions. The central bank begins to publicly discuss the overvaluation of its own currency. Finance ministers give interviews in which they casually mention that a strong dollar is not necessarily in the national interest. Central bank heads hint in speeches that currency adjustments are sometimes necessary. All of this happens subtly, never directly, but the message gets through to the markets. The first hedge funds begin to reduce their dollar positions, savvy money managers start to reposition.

A mentor once confided to me that the Fed never says anything by accident. Every word in a central bank speech is weighed ten times. So when Jerome Powell casually mentions in a press conference that the exchange rate plays a role in monetary policy considerations, that is not filler. It is a warning to those who can listen. Phase two is the shock intervention. After the market has been conditioned through jawboning, the real hammer comes down. On a completely normal trading day, usually a Wednesday or Thursday when liquidity is highest, the central bank suddenly starts selling dollars in gigantic quantities. Not spread over days, but within hours. Ten billion, twenty billion, fifty billion dollars are thrown onto the market. At the same time, other coordinated central banks buy euros, yen, and Swiss francs.

The dollar price collapses, not by one percent, but by five, six, or seven percent in a single day. The goal of this shock intervention is not just the price; it is the psychology. The markets must understand that the central banks mean business, that this is not a temporary weakness, but a structural realignment. Speculators who have bet on a rising dollar will be brutally stopped out. Their losses are so massive that they cannot immediately re-enter. The market is flipped.

I remember a trip through Southeast Asia, where I saw what currency devaluation really means. In Thailand after the Asian crisis of 1997, people told me how their savings were halved overnight, not because they made bad decisions, but because their government decided to float the baht. The difference with the coming dollar crash is only that this will not happen out of weakness, but out of strategic calculation. Phase three is the managed decline. After the initial shock comes the long-controlled devaluation. The central bank continues to intervene, but no longer dramatically. It continuously sells dollars whenever the price threatens to stabilize. It maintains the downward trend month after month, year after year, until the desired level is reached.

During the Plaza Accord in 1985, this process took about two years. This time, with the enormous sums we are talking about, it could take three to five years. During this time, the public will be fed narratives. There will be talk of necessary adjustments in the global currency system, of fair exchange rates and balanced trade relations. The media will interview experts who explain why a weaker dollar is actually good for the American economy. And technically, that is even true. American exports will become cheaper, the industry will become more competitive, jobs will return. Only the purchasing power of every single dollar you own will be systematically destroyed.

Why would other countries participate in such a thing? Why would China, Japan, Germany, or the Gulf States agree to a devaluation of the dollar when they themselves hold gigantic dollar reserves? The answer lies in the lack of alternatives. China alone holds over a trillion dollars in U.S. Treasury bonds. If the U.S. cannot service its debt and the system collapses, China loses that entire trillion. If, instead, they agree to a coordinated devaluation, they might lose 500 billion, but the system remains stable. They retain access to the American market and avoid a chaotic collapse that would destroy their export-oriented economies. It is the choice between a controlled loss and total chaos.

Japan is in a similar situation. The Bank of Japan holds hundreds of billions of dollars but is also extremely dependent on the American security umbrella, on the U.S. Navy protecting its trade routes, on nuclear deterrence against North Korea and China. When Washington says, we need your cooperation on a currency adjustment, Tokyo cannot say no.

Europe is more fragmented, but there are also strong incentives here. A weaker dollar makes the euro stronger, which is painful for German exports in the short term, but strengthens the role of the euro as an alternative reserve currency in the long term. The ECB has been dreaming for years of stepping out of the shadow of the dollar. The Plaza signal offers exactly this opportunity. When I sat in front of my first empty portfolio in 2008 after the collapse of Lehman, I learned a fundamental lesson. Systemic risks are never priced by the market until it is too late.

The markets always assume that the system will continue, that the rules will remain stable, that tomorrow will look like yesterday, and then suddenly everything changes in a single day. The raid check of January 23, 2026, is just such a signal. Most people did not notice it. It did not make the headlines; CNBC did not interrupt with breaking news, but in the trading souls of the big banks, in the offices of the central banks, in the quiet conference rooms where the real decisions are made, the message was crystal clear. It is starting.

Let me explain the technical details, as they are crucial. A raid check works like this. A trader from the New York Fed calls a primary dealer. These are the large banks that are allowed to trade directly with the Fed. He asks: “What is the current bid-ask spread for dollar-yen, for dollar-euro, for dollar-Swiss franc?” He inquires about the volumes, how much can you absorb at this price? 100 million, one billion, 10 billion? This information is collected and analyzed. The Fed creates an exact picture of market liquidity.

It then knows precisely how large its sell orders can be without completely blowing up the market. It calculates the optimal timing, the optimal volume, the optimal sequence. This is not improvisation; it is military precision. And here is the point that most overlook. A raid check is irreversible. Once the Fed asks this question, the markets know that something is coming. The banks prepare themselves. Hedge funds begin to adjust their positions.

This is like an army gathering troops at the border. Perhaps the attack will not come tomorrow, perhaps not next week, but it is coming, and everyone knows it. In my own investment strategy, I made this mistake once in the early 2000s when I thought I could outsmart central banks. I had a long position in the dollar, convinced that the fundamentals were strong. Then the Fed began verbal interventions. I ignored them. When the first small sales came, I thought it was just noise. When the massive intervention came, it was too late. I lost more in two weeks than I had earned in the entire year. Since then, I know that when the central bank sends a signal, you listen or you pay. The mathematical reality behind all of this is brutally simple.

The U.S. has two options to reduce its debt burden. Option 1: They save themselves healthy. This would mean cutting government spending by at least 2 trillion dollars per year. That corresponds to the complete abolition of Medicare, Medicaid, Social Security, and the defense budget combined. Politically absolutely impossible. Option 2: They inflate and devalue their debt.

This is painful but feasible. And historically, it is the path that every over-indebted nation ultimately takes. When I try to explain the value of money to my children, I always use the example of the Roman denarius. Under Augustus, a silver coin was almost pure silver. Years later, under Diocletian, the same coin was only silver-plated copper. The empire had gradually devalued its currency to pay its debts, to finance the army, to keep the state apparatus running.

And in the end, everything still collapsed. The difference today is only the speed and coordination. Modern financial capitalism does not allow for 300 years of creeping devaluation. It forces rapid drastic adjustments, and that is exactly what makes the Plaza signal so dangerous and at the same time so fascinating. It is the attempt to set a controlled fire to prevent a wildfire. Looking at inflation in daily shopping, I realize how far this process has already progressed. Five years ago, a liter of milk in the supermarket cost $1.

Today it is $1.50. That is 50% in five years. Officially, inflation is at 3%. This discrepancy between official numbers and lived reality is part of the strategy. The government measures inflation in such a way that the numbers look acceptable while actual purchasing power continuously declines. Now the weakness of the dollar comes as an accelerator. If the dollar loses 50% against other currencies, everything imported automatically becomes more expensive. Oil becomes more expensive, electronics from China become more expensive, German cars become more expensive, French wine becomes more expensive. For the average American, this means a massive loss of purchasing power. Their salary remains nominally the same. It may increase by 3% per year, but prices rise by 10, 15, 20%. That is the hidden cost of the Plaza signal. The state’s debt burden is reduced, but it is paid by every single citizen through creeping impoverishment.

It is the ultimate regressive tax because it disproportionately hits those who spend the largest part of their income on living expenses. For the top 10%, for those who hold assets in stocks, real estate, gold, a dollar devaluation is manageable, perhaps even profitable. Their assets rise nominally in price while their dollar debts decline in real terms. But for the broad middle class, for retirees with fixed incomes, for savers with bank accounts, it is a catastrophe. Their purchasing power is halved, with no chance to defend themselves. And here lies the real political explosive force. The Plaza Accord of 1985 could be carried out relatively quietly because the general public did not understand the connections.

Currency policy was a matter for experts. Today, in the age of social media, of financial influencers, of millions of small investors checking their portfolio apps daily, it is different. Information spreads faster, resistance could be greater, but that is exactly why the timing is now perfect. The Trump administration has already signaled that it will take protectionist measures. Tariffs on Chinese imports, restoring production, America first. A weak dollar fits perfectly into this rhetoric. One can sell to the public that a dollar devaluation protects American jobs, strengthens industry, makes the country more independent.

The negative effects on purchasing power will be presented as temporary adjustment costs. At the same time, there is an international mood favoring a reorganization of the currency system. China has been pushing for years for a larger role for the yuan. Europe wants to strengthen the euro. The BRIC countries are discussing alternative payment systems. The dollar is under pressure like never before since Bretton Woods. In this environment, Washington can sell a controlled devaluation as an orderly transition to a multipolar currency system.

The technical implementation will likely run through the Exchange Stabilization Fund, a little-known mechanism of the U.S. Treasury that can intervene directly in the foreign exchange market without congressional approval. The ESF has about 100 billion dollars in liquid assets, but through leverage and coordination with other central banks, it can move multiples of that. In the early days of the intervention, the ESF will sell dollars while simultaneously buying other currencies. The Bank of Japan, the European Central Bank, the Swiss National Bank will coordinate.

Buying dollars but in smaller amounts than sold, so that net downward pressure is created. The first trading days after the intervention begins will be chaotic. Volatility will explode. The VIX, the fear index of the markets, will soar. Hedge funds will conduct fire sales, but within weeks a new normal will establish itself. The markets will understand that this is not a temporary event but a structural shift. And then the adjustment begins. What does this mean concretely for you? What options do you have as an individual when the Plaza signal unfolds? First priority: Get out of pure dollar assets. Every bank account, every dollar bond, every dollar money market fund will massively lose value in real terms. You need assets that rise against the dollar or at least maintain their purchasing power.

Gold is the most obvious option. Gold is the ultimate non-fiat currency. When all paper currencies devalue simultaneously, gold is the anchor. Historically, in every major currency crisis from Weimar to Zimbabwe, gold has preserved its purchasing power. Not because gold has intrinsic value, but because it is the only asset that does