Since the US runs structural trade deficits with the rest of the world, those dollar surpluses to other nations have to be reinvested into dollar assets of some sort, and many of those dollars find their way to the US stock market. As a result, the foreign sector owns a larger and larger percentage of the S&P 500, and drives up the valuations. And the bulk of the returns came from the big US internet companies with network effects.

But many people in the world cannot access the S&P 500 or other top stock markets. My family in Egypt for example doesn’t hold any stocks; they hold real estate, local currency, and some US dollars. Stock ownership is pretty rare there, whether it be for local stocks or foreign stocks.

Q.) Are we currently witnessing the end of the US Dollar standard, in place since 1971?

Lyn Alden: Yes, basically.

More specifically, I think we’re seeing a restructuring of the dollar standard. In the post-WWII environment, and especially in the 1970s-to-present petrodollar environment, the US has had a rather uncontested ability to strengthen the network effect of its currency and government bonds [...] In a hypothetical world where bitcoin was never created, gold would likely be the main beneficiary once again; its properties would be reconsidered and it would likely be brought back into being the biggest reserve asset. And even today with bitcoin at a $1 trillion market cap or less, gold is still basically the main option that large central banks have. [...] But over a long enough timeline, bitcoin represents another possibility for a neutral reserve asset. It has to grow into that role, and be tested along the way to see how suitable it is.