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In Chartbook 481, Adam Tooze argues that the dollar’s role is shifting from a reserve currency backed chiefly by foreign Treasury holdings toward a “profit dollar” supported by foreign investment in US assets, especially equities. He asks whether that model can withstand a reversal in AI-related investment, particularly if investors also lose confidence in the dollar as a safe haven.
In Chartbook 481, historian and economic commentator Adam Tooze asks whether the dollar can remain stable as foreign investment in US assets increasingly centers on equities rather than Treasury bonds. The analysis argues that this “profit dollar” depends more on investors seeking returns from US markets, including AI-related shares, and may be more exposed to a reversal than the familiar reserve-currency model.
Tooze says the dollar remains the central currency of the world economy, but the financial flows underpinning its position have changed. In the model that took shape in the 2000s, foreign investors accumulated US government debt, recycling overseas surpluses into Treasury securities. The US budget and current-account deficits remain, he writes, but the pattern of foreign investment is no longer adequately described by that reserve-currency framework.
Drawing on analysis by Brad Setser, Tooze describes the shift as “de-reservification,” rather than de-dollarization: foreign claims on the United States continue to grow, but through a mix of state banks, pension funds and other quasi-sovereign investors, with the value of foreign holdings increasingly tilted toward US equities. Tooze calls the dollar’s newer role a “profit dollar,” or, in another formulation, a “portfolio currency.” He attributes the shift both to reduced appetite for US government debt and to the long-run performance of US equity markets.
The article cites Treasury International Capital data discussed by MUFG analyst Lee Hardman. Net foreign purchases of US equities reached $244 billion in April and May, while purchases over the prior 12 months totaled $904 billion. Private investors accounted for $781 billion of that 12-month total and official investors for $123 billion. Hardman said demand for AI-linked companies was a major driver of the inflows, which he said supported both US asset prices and the dollar. These figures describe purchases over the stated periods; they do not by themselves establish how flows will respond to a downturn.
The Dollar’s New Investment Support
The change matters because foreign demand for US assets can support the dollar through more than one channel. In Tooze’s account, investors are increasingly buying US financial assets for expected returns, especially equities, rather than primarily holding Treasuries as reserves. When that demand is strong, it can reinforce US share prices and the currency at the same time.
But a return-seeking flow may behave differently from reserve holdings when confidence falters. Tooze highlights the risk that investors who see the dollar as a crowded bet on US growth, higher yields and AI success could reduce exposure if those expectations weaken. If equity losses coincide with dollar weakness, foreign investors could face losses in both their holdings and their currency positions. The article raises that possibility as a vulnerability, not as a forecast that such a reversal will occur.
The question also tests a longstanding assumption about the dollar’s safe-haven role. If investors sell US assets during a shock rather than seeking shelter in the dollar and Treasuries, a market downturn could feed back into the currency. That would matter beyond technology shares because the dollar remains central to global finance, and changes in demand can affect international portfolios and funding conditions.
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From Treasury Reserves to US Equities
Tooze contrasts the current pattern with the reserve-currency model that developed in the 2000s. Under that model, foreign accumulation of US Treasuries was a central way overseas surpluses were invested. In the account presented in Chartbook 481, foreign investors still hold US assets, but growth in the value of their holdings increasingly reflects equities rather than government bonds.
The analysis links this evolution to two longer-running forces: investors’ reluctance to accumulate more American government debt and the relative performance of US equity markets. Rising valuations also increase the value of foreign portfolios already invested in those shares, adding to the apparent weight of equities in overseas holdings. Tooze says the recent AI investment boom has added momentum to the pattern.
The article also points to the market reaction around “Liberation Day” in April 2025 as a warning about the relationship between US assets and the dollar. It describes that episode as a potential “triple shock,” involving pressure on US equities, uncertainty around AI following DeepSeek’s model breakthrough, and a falling dollar. Citing a report by the Bank for International Settlements, Tooze says foreign investors’ currency hedging contributed to the sell-off as some sought to keep their US equity positions while reducing dollar exposure.
“These allocations [are] like the “hot money” flows that dominate emerging markets.”
— Erik Nelson, global head of FX strategy at Wells Fargo, as quoted in the Reuters report cited by Tooze
Whether Safe-Haven Demand Holds
The central uncertainty is whether foreign investors will continue to treat the dollar and US assets as a refuge during a broad market shock. Tooze notes that investors have sometimes sought safety in other currencies instead. The source material does not establish how investors would respond to a sustained fall in AI-related shares, or whether equity selling would be accompanied by a lasting retreat from the dollar.
Nor does the cited purchase data show how much of the demand was specifically tied to AI, how those positions are hedged, or whether recent flows will continue. The figures cover defined periods and identify private and official buyers, but they do not settle the question of the profit dollar’s durability. Tooze frames a self-reinforcing cycle of falling asset prices and currency losses as a risk scenario, not an observed outcome in the data presented.
Watch Capital Flows and Hedging
The next evidence will come from future Treasury International Capital data and market behavior as investors reassess AI-related valuations, US growth expectations and interest rates. Changes in foreign purchases of equities and bonds may indicate whether the portfolio shift described by Tooze is continuing or reversing.
Investors’ currency-hedging decisions will also matter. The April 2025 episode, as described in the BIS report cited by Tooze, shows that investors can retain US shares while reducing exposure to the dollar. Whether that pattern recurs during later market stress remains unresolved. Chartbook 481 does not offer a firm prediction; it identifies the durability of foreign demand and the dollar’s safe-haven status as the key issues to monitor.
Key Questions
What does “profit dollar” mean?
It is Adam Tooze’s term for a dollar increasingly supported by foreign investors seeking returns from US financial assets, particularly equities, rather than chiefly by overseas holdings of US Treasuries as reserves.
Does the article say the dollar is no longer the world’s central currency?
No. Tooze says the dollar remains the central currency of the world economy. His argument is that the financial flows supporting that position are changing.
How much did foreign investors buy in US equities?
The figures cited in Chartbook 481 say net foreign purchases totaled $244 billion in April and May and $904 billion over the 12 months through that period. Private investors accounted for $781 billion of the 12-month total, compared with $123 billion from official investors.
Why could the shift make the dollar more vulnerable?
Tooze argues that investors seeking returns may reduce exposure if confidence in US shares, AI-related companies or the growth outlook weakens. If equities and the dollar fall together, foreign investors could face losses across both asset values and currency positions. The article presents this as a possible risk, not a prediction.
What remains unknown?
The cited material does not establish whether foreign equity inflows will persist, how investors would react to a prolonged AI-market decline, or whether the dollar would reliably attract safe-haven demand in a future shock.
Source: adamtooze.substack.com
