Red Sea Crypto Invasion: 4% of US GDP Allocated for Maritime Control

• US Dollar Stability Threatened Amid Red Sea Conflict
• US Dollar's Dominance Tied to Maritime Control
• The Cost of Sea Control
• Effects on US Equities Markets

US Dollar Stability Threatened Amid Red Sea Conflict

The stability of the US dollar is being tested as tensions in the Red Sea persist. On Sunday, a missile attack targeted a US-owned container ship off the Yemen coast. The US Central Command identified the source of the anti-ship ballistic missile to be regions of Yemen controlled by the Houthi group. The ongoing threat has disrupted the free flow of merchant vessels navigating the Red Sea.

US Dollar's Dominance Tied to Maritime Control

Mike Novogratz, CEO of Galaxy Digital, highlighted the critical role of maritime control in determining the world's reserve currency. For many years, the US dollar has enjoyed this status, largely due to America's dominion over the seas. Novogratz underscored that he who rules the sea typically secures the reserve currency mantle, a privilege currently held by the US dollar.

The Cost of Sea Control

Novogratz also underlined the ongoing obligation the US carries in upholding its maritime leadership. Although this position extracts approximately 4% of the country's GDP annually, Novogratz insists that the US cannot afford to relinquish this role, given its importance in sustaining global trade flow.

He stated, The country that controls the seas has always been rewarded reserve currency status. It costs the USA approximately 4% of GDP to keep that rank. It gives us the benefit of borrowing endlessly at low rates. The actions in the Red Sea are very appropriate in this context.

Effects on US Equities Markets

The repercussions of the Red Sea attack have echoed in the US equities markets. On Monday, the Dow Jones Industrial Index fell by 118 points while the Nasdaq ended up barely in the green, with an increase of just 2.58 points. The US dollar index is currently precariously low, trading at 102 points. Any further escalation in tensions could push it under 100.

Edited by Jonathan Stoker