Morning Download

Personal finance + economics + markets

Good morning investors! We’re back after a long weekend (in the U.S.) and we hope you had fun with your loved ones. Now that we’re back to work, let’s talk about money.

🌎 First, more and more of our readers are from outside the U.S. so starting today we’ll be covering more global issues.

Today we cover:

• Is it ‘the end’ for the USD?

• International markets see a jump

• The financial benefits of having children

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📊 Economy and News 

Is it ‘the end’ for the US Dollar?

We spent a great amount of 2022 worrying about the dominance of the USD. The greenback strengthened in 2022 as other major currencies, including the JPY and EUR suffered. However, it seems that it’s now time for the USD to lose its power due to geopolitical and geostrategic shifts, including the ongoing Russia-Ukraine crisis and India’s decision to trade in rupee.

“The risk of de-dollarization, which is a periodically recurrent theme throughout post-war history, has returned into focus due to geopolitical and geostrategic shifts,” said Alexander Wise, a researcher at J.P. Morgan.

This isn't the first time that the dollar is in danger. It has happened several times throughout history. So, where are we headed?

De-dollarization

Some experts believe that we’re entering the ‘dollarization’ phase, i.e.: when there is a reduction in demand for the greenback due to countries and organizations using other currencies in world trade and financial transactions.

But why?

De-dollarization could cause the USD to fall due to reduced corporate, institutional, and investor demand for the dollar. In fact, calls to reduce dependency on the USD are increasing. Countries such as Brazil and China are willing to use other currencies. In fact, India recently used INR to buy crude oil from the UAE.

Which currency if not the USD?

This can be hard to answer because there are hundreds of options out there. Countries prefer to use their native currencies, however, that may not always be possible. We are, however, seeing a shift.

Countries are giving up on USD and collecting other currencies. Around three-quarters of the shift in reserves away from the USD has gone toward nontraditional reserve currencies, such as the AUD, CAD, and SEK.

So, is the US Dollar over?

Not yet.

The USD is still the most widely used currency in the world. It will be years before it loses its top position.

“The dollar’s transactional dominance remains top-of-class despite secular declines in U.S. trade shares. On the other hand, de-dollarization is evident in FX reserves, where the dollar’s share has declined to a record low of 58%,” said Wise.

What happens if USD loses value?

It may be difficult to correctly predict yet but a fall in USD’s value could have a global impact, including reduced FDI (foreign direct investment), higher borrowing costs, and additional expenses. For the US, the stock market may suffer. However, at the same time, it might cause some international markets to grow.

For now, it might be wiser to not have all your investments in a single currency.

Quick hits:

• Youth unemployment continues to surge in China.

• Germany is now in recession.

• The Fed doesn’t seem to be interested in raising rates this month.

📈 Stocks

S&P 500 4,515.77 (0.18%)
DJIA 34,837.71 (0.33%)
NASDAQ 15,490.86 (0.066%)
VIX 13.79 (1.62%)
* Prices as of Sep 4rd, 12:20 AM UTC. U.S. markets were closed yesterday.

International markets are surging

World markets surged on Monday while the US market remained shut for the Labor Day holiday.

Germany’s DAX advanced 0.7% to 15,949.69 and the CAC 40 in Paris picked up 0.8% to 7,354.96. In London, the FTSE 100 was up 0.8% at 7,522.38.

🔐 Crypto

Bitcoin $25,866.30 (-0.40%)
Ethereum $1,628.97 (-0.41%)
Total market cap $1.04T (0.44%)
* Prices as of Sep 5th, 12:20 AM UTC

Crypto prices have been stagnant for a while and BTC is once again back under $26K. Here are a few more links worth checking out:

• London Stock Exchange Group draws up plans for a blockchain-based digital assets business.

• South Korea is preparing to freeze North Korea's crypto assets

• Investors anxious as $10 million Solana transfer sparks price drop fears.

💵 Personal Finance

Financial benefits of having kids

When we think of the financial side of raising children, we usually think of related expenses. However, there are also some exciting financial benefits of having kids.

Tax benefits

This is the biggest benefit of having children. The US and some other countries offer tax rebates and perks to filers with children. Here are a few things to know:

• The Child Tax Credit can help families offset the cost of raising kids. The credit is worth up to $2,000 per qualifying child.

• The Child and Dependent Care Credit covers qualified expenses for the care of disabled dependents and children. Only up to $3,000 (expenses) are covered for one individual and up to $6,000 for two or more individuals. The percentage, however, depends on your adjusted gross income.

• The Adoption Tax Credit is for families that adopt a child. For 2023, the adoption tax credit is fully available in the amount of $15,950 if your modified adjusted gross income is equal to or less than $239,230. If your modified adjusted gross income is more than $239,230 but less than $279,230, you will receive a reduced tax credit. The amount is revised every year. Families who were in the adoption process during 2022 can claim up to $14,890 in eligible adoption expenses for each eligible child.

• The Earned Income Tax Credit is a refundable tax credit that ranges from $560 to $6,935 for tax year 2022.

In addition, you might be eligible for other tax-related perks based on your country, income, and number of kids. Talk to a lawyer to know more.

Grants

A number of government and private organizations offer grants to families with children. Based on your location, you can get up to $20,000 to spend on your children and even more in some cases. For example, there are additional grants for people who raise children with special abilities.

Moreover, some of these grants are designed to help people buy a home. You will, however, have to meet eligibility requirements, i.e.: have a specific number of children, earn a specific amount of money, etc.

Free money

Some countries are now offering free money for having kids in an effort to improve birth rates. The list includes popular names like Germany, Japan, Russia, and Taiwan. However, these offers usually come with conditions. Also, we do not recommend you to have kids just to get paid.

Paid leaves

Based on your location, you might get paid maternity and paternity leaves that can run for up to 12 months. European nations, including Estonia, Croatia, and Bulgaria are known for offering gracious leaves – 68 to 62 weeks – to mothers. Similarly, countries like South Korea and Sweden offer long paid leaves to dads.

Family discounts

A large number of places, including entertainment avenues, hotels, and some airlines, offer family discounts.

These great benefits can help make kids more affordable. Still, we suggest that you watch this video to know if you’re financially prepared to have kids:

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👩🏽‍⚖️ Legal Stuff
Nothing in this newsletter is financial advice. Always do your own research and think for yourself.