Latest / The PhilStockWorld Investing Podcast / The US Dollar's "Hidden Tax": Decoding the FOMC, Trump, and Your Shrinking Wallet

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The US Dollar's "Hidden Tax": Decoding the FOMC, Trump, and Your Shrinking Wallet · The PhilStockWorld Investing Podcast

• 0:00
  Penny: Welcome to the Deep Dive. We're here to help you get informed fast. Today we're tackling a really big one. The US dollar. What's been happening to it, the forces pulling the strings behind the scenes.
• 0:11
  And we're digging into a great piece to guide us. It's called Which Way Wednesday FOMC Edition. It's by Phil over at philstockworld.com. Honestly, it's a fantastic example of the kind of deep financial analysis you find on their site. They really break down these complex stories that often fly under the radar, helps you see what's really going on.
• 0:30
  Roy: Yeah, and this one specifically focuses on the Federal Open Market Committee meeting the FOMC from 09/17/2025. What's really interesting about Phil's take and what we'll get into is just how profound the implications are, and maybe a bit surprising too, not just for the dollar, but for, well, your wallet for American consumers.
• 0:48
  Penny: Right. So that's our mission today. We wanna unpack the key arguments from Phil's analysis, shine a light on some frankly eye opening facts, and pull out the crucial takeaways. Help you cut through all the noise and jargon?
• 0:59
  Roy: Exactly. It's not just about what the Fed did, it's the why. Why does it matter? And how can you think critically about these big economic currents? We'll lean on Phil's insights, and actually we'll also touch on some analysis from philstockworld.com's advanced AI and AGI entities.
• 1:14
  You can even follow some of them like Robojohn Oliver or Bodhi at the AGI Roundtable on the site. They add a pretty unique layer to understanding market moves.
• 1:23
  Penny: Okay. Let's dive in then. The first big idea from Phil, and one maybe people don't talk about enough, is this hidden tax on Americans. It's not like an IRS form. Right?
• 1:32
  It's this quiet loss of value. Your money just doesn't go as far because the dollar's been devalued so much. Phil points out it lost another 1% just in the week before that September meeting. But the bigger picture, it fell from a 110 back in January down to 96.4. What, a 12.36% drop in less than a year.
• 1:51
  It makes you wonder, like Phil asks, why isn't this a bigger deal for folks?
• 1:54
  Roy: Well, comes down to some pretty basic economics just on a massive scale. When the Fed cuts interest rates, holding dollar assets becomes less attractive for say foreign investors. Lower returns mean they're likely to sell their dollars, maybe buy euros or yen instead.
• 2:08
  Penny: Right. Less demand.
• 2:10
  Roy: Exactly. And at the same time, lower rates often mean the fed is creating more dollars, you know, trying to stimulate the economy. So you've got less demand and more supply. Phil puts it simply, cut the rental rate on dollars, make them less scarce. And, yeah, the dollar becomes worth less.
• 2:25
  It's textbook stuff really.
• 2:26
  Penny: And Phil argues this isn't just a one off problem. He calls it a vicious cycle.
• 2:30
  Roy: Mhmm.
• 2:31
  Penny: Think about it. The weaker dollar makes imports electronics, food, cars, whatever, more expensive Mhmm. Inflation. Right. Which hits people's budgets hard, especially if they have debt.
• 2:43
  And then what happens? There's pressure on the Fed to maybe cut rates again to ease the pain.
• 2:49
  Roy: Which just weakens the dollar further. It feeds on itself.
• 2:52
  Penny: Yeah. Phil actually estimates that every 1% rate cut tends to weaken the dollar by about three to 5%. So if rates were to fall from say 4.37% down to 3%, you could be looking at another four to 7% drop.
• 3:07
  Roy: On top of the 12% we already saw.
• 3:09
  Penny: Exactly.
• 3:10
  Roy: Yeah.
• 3:10
  Penny: So suddenly your gas, your groceries, anything imported could be costing you 15, maybe even 20% more, and the savings you have. Have. They buy 15 to 20% less. It's a huge bite out of your purchasing power.
• 3:22
  Roy: And that really brings it home for you, the listener. Your stocks might be going upright. But what's happening to the actual value of the dollars you save and spend every day? Phil calls it a hidden tax. And it is.
• 3:33
  It's quietly making everyone poorer in real terms. Yeah. It's not just some abstract financial number. It affects how much you can actually buy.
• 3:40
  Penny: Okay. Now here's where the article gets, let's say, really interesting. It brings in the political angle. Specifically, president Trump's pressure on Fed Chair Powell to lower rates, and it connects this pressure directly to Trump's own reported financial interest.
• 3:52
  Roy: Yeah. It's a pretty controversial claim in the piece. Phil's analysis suggests that Trump's policies are, and I'm quoting here, trashing the dollar, but that he personally benefits. The article asserts, and this is quite a claim, that maybe 60% of Trump's net worth is tied up in cryptocurrencies, and that he supposedly made billions this year specifically because his policies are weakening the dollar, which tends to push crypto prices up. That's the argument laid out.
• 4:18
  Penny: Wow. And the article is also pretty critical of crypto itself, isn't it?
• 4:22
  Roy: Oh, definitely. Phil describes creating a new token as like literally easier than setting up a website. Yeah. You just grab some open source code, change a name, maybe call it Philcoin or Dollar Destroyer, tweak a few things and boom, you've launched it in under an hour.
• 4:37
  Penny: He doesn't sound impressed.
• 4:38
  Roy: Not at all. He uses a Ponzi scheme analogy. The argument is that most cryptos don't generate cash, don't pay dividends, don't actually produce anything. Their main function, in this view, is just to be sold to the next buyer at a higher price. Yeah.
• 4:51
  Good for early birds, not so much for later ones.
• 4:54
  Penny: And he gives that Trump meme coin example right. Launched at $30 shot up to $77.
• 4:59
  Roy: And then crashed down to $8.50. Yeah. And the really striking part of the analysis is the claim that Trump and his family allegedly kept 80% of the initial billion coins. That's 800,000,000 coins. At the peak, that would have been worth, what, around $6,800,000,000.
• 5:16
  While the article states over 764,000 public investors are now underwater.
• 5:21
  Penny: So the article frames this as a, well, a brazen conflict of interest. That's the term used.
• 5:26
  Roy: It does. It precrays Trump as potentially profiting hugely from policies that hurt the value of the currency everyone else uses, while also selling, again in Phil's words, worthless computer code to his supporters.
• 5:39
  Penny: It puts some stark numbers on it too. Americans losing trillions in purchasing power collectively from the dollar decline.
• 5:44
  Roy: Right. Estimated around $12,360,000,000,000 While Trump's crypto gains are estimated in the article at $5.00 $7,000,000,000 The piece flatly states, Trump's crypto gains come directly from American dollar holders' losses. It paints a picture of, well, a significant wealth transfer. Raises some serious questions.
• 6:00
  Penny: Okay, so that political and crypto angle definitely adds a lot of heat to the situation. Let's pivot back though to the main event, the FOMC meeting. Itself. The market, as you said, was pretty much expecting the rate cut. Right?
• 6:14
  Like, 96% certainty of a 25 basis point cut?
• 6:17
  Roy: Yeah. The quarter point cut was almost baked in. So the the real focus wasn't just the cut. It was everything around it. Powell's press conference, the language he used, and especially the summary of economic projections.
• 6:30
  Those famous dots that show where Fed officials think rates are headed.
• 6:34
  Penny: People were looking for clues, weren't they? Is this just a little trim or the start of something bigger?
• 6:38
  Roy: Exactly. And Powell was in a tough spot. He couldn't just come out and say, yeah, the dollar is tanking partly because of our policies without, as Phil puts it, exposing our whole financial system as a joke.
• 6:48
  Penny: So he had to sound tough on inflation.
• 6:50
  Roy: Right. Talk tough on inflation even while cutting rates. Try to project stability, stop a complete dollar route. But you could see the skepticism in the markets already. Gold was hitting records.
• 7:01
  Oil was creeping up near $65 Investors were clearly hedging before he even spoke. They anticipated weakness.
• 7:08
  Penny: And this is where some of that philstockworld.com analysis, including the AI came in really handy, They had that Fed day playbook.
• 7:14
  Roy: Yeah, Warren, one of their AI entities, laid out different scenarios. The base case, the most likely one with 96% odds, was the 25 basis point cut plus a dovish tone, meaning Powell signals more cuts might be possible. Further dollar weakness, maybe testing the 95 level on the DXY index. Stocks might pop initially, then sell off the classic sell effect and gold and crypto would likely rip higher as dollar hedges. The clear implication speeding up that dollar decline, bringing in more inflation from imports.
• 7:45
  Penny: Okay. What were the other scenarios?
• 7:46
  Roy: Well, was a hawkish surprise, same 25 basis point cut, but Powell sounds more cautious, maybe downplays future cuts.
• 7:53
  Penny: So less dovish.
• 7:54
  Roy: Right. A dovish fate. In that case, the dollar might stabilize, maybe even bounce a bit. Stocks could dip. That would mean Powell's trying to tap the brakes on the dollar slide, but he risks spooking the stock market.
• 8:06
  Penny: And the long shot up.
• 8:08
  Roy: The shock and awe, a 50 basis point cut, very low odds, but if it happened, big flush in the dollar, maybe below 95, stock surge then reverse hard, gold and crypto. Explosive move, maybe $3,800 plus gold. That would signal the Feds basically going all in on growth, sacrificing the dollar, full blown dollar destruction scenario.
• 8:28
  Penny: It's fascinating how they mapped that out beforehand.
• 8:30
  Roy: It really is. And the market did react pretty much in line with that base case, the risk management cut. It shows how valuable that kind of forward looking analysis can be. It's not just about the decision, but the whole context.
• 8:42
  Penny: And the community at philstockworld.com picked up on this too. I saw notes about the chat room discussion.
• 8:46
  Roy: Oh, Immediately. The article mentions Robo John Oliver and AGI there commenting on the insidious political calculus. Basically, the idea of using policy to juice markets markets through the twenty twenty six midterms, maybe to help cement project 2025 reforms, whatever the cost of the dollar.
• 9:05
  Penny: And Zephyr, another AGI.
• 9:07
  Roy: Zephyr called the positive retail sales number a 'tariff panic front load' meaning people rushing to buy before potential new tariffs hit which masked underlying weakness or consumer rot as Zephyr put it.
• 9:18
  Penny: It shows that mix of human insight and well sophisticated AI analysis
• 9:25
  Roy: And it's not just theory, it translates into practice. The article highlights some real masterclass examples of portfolio defense from the community and Phil's guidance. Like Conagra Brands A member asked if it was a good dividend play.
• 9:37
  Penny: And Phil wasn't keen.
• 9:38
  Roy: No. He pointed to high debt, falling earnings, and said that 7.4% dividend looked shaky, suggesting management should cut it. And Bodie, another AI, jumped in with details, calling it a refinancing death spiral. Basically, CAG keeps borrowing at higher rates to pay off old debt, and they have a big debt maturity wall coming in 2026.
• 9:58
  Penny: Ouch. So Bertie was stressing why looking at the actual quarterly reports is crucial.
• 10:03
  Roy: Exactly. Quarterly reporting protects investors, as Bodhi put it, cuts through the spin.
• 10:08
  Penny: There was an ExxonMobil example too, right? XOM Yeah,
• 10:11
  Roy: a member asked about adjusting an option spread on XOM. Phil gave specific tactical advice but also explained why. He noted that XOM's refining and chemicals businesses give it some insulation if oil prices fall. Then he added that great line, Always look for those opportunities to improve your position. Always like homework.
• 10:28
  Penny: Like homework. Constant vigilance.
• 10:31
  Roy: Pretty much. And then for General Mills GIS, another member query, Phil suggested a strategy: buy the stock around $49 sell some long term calls and puts against it. The goal was to get a net cost basis around $34.15 with potential for almost 100% upside, a boring dividend play he called it, but potentially very effective.
• 10:52
  Penny: So these are real practical examples of managing investments in this tricky environment.
• 10:57
  Roy: Absolutely. And Phil noted their own long term portfolio, the LTP on the site, was actually up almost 5% that morning, benefiting from the weak dollar, what he calls the dollar destruction dividend. It shows members were navigating this using the guidance.
• 11:09
  Penny: Okay. So pulling back to the Fed meeting's immediate aftermath, what happened right after the announcement?
• 11:15
  Roy: Well, they did cut the 25 basis points as expected. The new range, 4% to 4.25%. Powell explicitly called it a risk management cut.
• 11:23
  Penny: And the market reaction. Kind of muted.
• 11:25
  Roy: Yeah. Very much a priced in feel. S and P down just a tiny bit, NASDAQ down slightly more, Dow actually finished up. The dollar did firm up a little on the day, a small bounce. But the overall analysis from Phil suggests the underlying trend, that medium term treadmill of easing, still points downwards for the dollar eventually.
• 11:44
  Penny: And the other economic data points, the macro crumbs. Any good news there?
• 11:49
  Roy: Not really encouraging, frankly. Housing starts collapse, down 8.5% in the month. Permits are down too especially single family homes down south. Mortgage applications were up almost 30% but Phil noted that was mostly refinancing activity not people buying new homes.
• 12:05
  Penny: Because they can't afford them.
• 12:06
  Roy: That's exactly Phil's point. He's quoted saying, The problem is people can't afford what a home costs to build, so just building more doesn't solve the core affordability crisis. Plus, business inflation expectations were still stuck around 2.3%. Not exactly cooling off rapidly. Gives off that stagflation whiff Phil mentioned.
• 12:24
  Penny: So, looking ahead, what did Phil and the AI wrap up identify as the key things to watch? What matters from here?
• 12:30
  Roy: A few crucial points. Powell's message wasn't really a full pivot, more like a nudge. This probably caps how much stock valuations can expand unless the dollar keeps sliding.
• 12:42
  Penny: So the dollar index, the DXY is key.
• 12:44
  Roy: Absolutely. Watch that 96 level. If the DXY breaks below it convincingly, that could reignite the dollar destruction dividend trade. Good for gold, materials, companies earning overseas. Also, keep an eye on the Bank of Japan meeting coming up Friday and options expiration OPEX.
• 13:02
  Those could cause some positioning shifts, especially since overall market participation, or breadth, still looks pretty thin.
• 13:08
  Penny: And there is an interesting analysis on what Powell is not saying. What was that about?
• 13:13
  Roy: That came from the AI analysis. It highlighted what Powell deliberately avoided saying, which is often as important as what he did say. For instance, not admitting inflation is way above target, just calling it somewhat elevated.
• 13:23
  Penny: Yeah, I'm playing it.
• 13:24
  Roy: Right. Not committing to a specific number or timing for future cuts, keeping his options open, carefully avoiding strong comments on political pressure, trying to appear independent, not really acknowledging the full hardship inflation causes households.
• 13:40
  Penny: Also not giving clear thresholds for labor market weakness that would trigger more cuts.
• 13:45
  Roy: Exactly. And not backing away from the 2% inflation target, but also not really discussing how things like trade policy, tariffs, or even immigration might be feeding into inflation long term.
• 13:56
  Penny: So putting all that together, what's the take away from what he didn't say?
• 14:00
  Roy: It signals he's trying very hard to protect the Fed's credibility. He doesn't wanna look like he's caving to political pressure. He wants maximum flexibility. He's walking that tightrope, trying to manage market expectations without painting himself in a corner. It's a real balancing act.
• 14:15
  Penny: I
• 14:22
  Roy: think that's a fair assessment based on Phil's analysis. The real story seems to be ongoing, almost systematic devaluation of the dollar driven by this mix of economic policy and as the article controversially argues political factors and the result is this persistent hidden tax hitting everyday people.
• 14:42
  Penny: It really underscores that you need to look beyond the headlines, doesn't it? Understand not just what officials say, but maybe what they can't or won't say. And platforms like philstockworld.com with their mix of expert analysis, community discussion, and even AI insights seem designed to help people do exactly that navigate this complexity.
• 15:02
  Roy: They offer tools and perspectives to see that bigger picture, absolutely. So maybe the final thought for you, the listener, is this: considering everything we've discussed about the Dollar's erosion, how do you personally value economic growth if it seems built on devaluing the currency? And more practically, what steps can you take individually to try and protect your own purchasing power in this kind of environment?
• 15:22
  Penny: A lot to think about. Thanks for joining us for another deep dive. We'll catch you next time.