Michael Kamali , Doctor of Business Economics candidate
By Michael Kamali, CEO of California Financial Consulting, in Doctor of Business program, MBA, Chartered Economist, Chartered Financial Consultant, Fiduciary Financial Advisor for California Doctors & Dentists | Helping You Cut Taxes, Grow Wealth, and Protect Everything You’ve Worked So Hard to Build Without the Stress, Confusion, or Sales Pitch. MBA, ChFC, ChE
🔍 Overview
For decades, the Federal Reserve has relied on a simple yet powerful dynamic: strong global demand for U.S. Treasury securities has helped anchor interest rates and secure the U.S. government’s ability to borrow at low rates. This system not only kept bond yields predictable but also allowed the Fed to influence broader economic conditions with a high degree of control.
However, the global financial system is undergoing rapid changes.
The topic of my dissertation research is that the BRICS countries (Brazil, Russia, India, China, and South Africa) are rapidly gaining ground in pursuing policies of de-dollarization, i.e., abandoning the U.S. dollar as a reserve currency, in trade settlements, and, most importantly, in U.S. Treasury securities.
As this shift accelerates, it’s becoming clear that the Federal Reserve’s traditional tools may no longer yield the same results. The Fed’s influence is being eroded not by domestic fiscal mismanagement but by international capital reallocation.
💱 What’s Driving This Shift?
BRICS countries are diversifying their reserves for both economic and geopolitical reasons:
· Political insulation: Reducing exposure to U.S. sanctions
· Strategic autonomy: Less reliance on dollar-dominated systems like SWIFT
· Reserve diversification: Shifting to gold, yuan, and intra-BRICS currencies
· Emergence of alternative institutions: New Development Bank and proposed BRICS payment platforms
By choosing to hold fewer U.S. Treasuries, BRICS nations are not only seeking financial independence, they’re redesigning the global flow of capital.
📊 Key Findings from My Research
Using a Rapid Evidence Assessment (REA) methodology, I examined over a dozen peer-reviewed studies and financial reports published between 2022 and 2025. The evidence points to a significant and sustained decline in BRICS participation in U.S. Treasury auctions, particularly from China and Russia.
This trend has triggered auction volatility, rising yields, and most critically a weakening of the Fed’s ability to guide long-term interest rates through traditional channels.
🧠 Stakeholder Theory: A Lens on Institutional Response
To understand this transformation, I applied Stakeholder Theory, originally developed by Edward Freeman (1984), to the macro-financial level.
In this framework:
· The Federal Reserve is a primary stakeholder responsible for monetary stability.
· Foreign sovereign investors (like BRICS central banks) are influential external stakeholders.
· Institutional investors such as pension funds and mutual funds, must respond to volatility.
The U.S. Treasury itself is a stakeholder whose borrowing strategy is under direct pressure.
Stakeholder Theory helps explain why these actors don’t operate in isolation they are part of a web of financial interdependence. When BRICS countries adjust their capital strategy, it reverberates through this stakeholder network.
📉 How the Fed Is Losing Leverage
Here’s where the real pressure builds:
Historically, the Fed’s influence over long-term rates was enhanced by robust foreign demand for Treasuries. But as that demand weakens:
· Open market operations become less effective
· Forward guidance loses predictive power
· Quantitative easing results in diminished yield compression
In short, the Fed’s “firepower” is dampened by external disinterest.
Studies like Mosharrafa (2024) and Nakra (2025) show that this limits the Fed’s ability to stabilize the economy during crises or pursue proactive monetary policies during slowdowns. It’s a significant risk to national economic planning.
🔁 Institutional Adaptation
This shift also affects how institutional investors, key stakeholders in the Treasury market manage risk:
· Pension funds must account for higher long-term yield volatility
· Mutual funds are increasingly hedging with gold, eurobonds, and emerging-market securities
· Insurance firms are adjusting actuarial assumptions due to interest rate unpredictability
This systemic adaptation further reinforces the changing landscape making it harder for U.S. institutions to rely on a dollar-dominant world.
🧭 What Are the Fed’s Options?
Facing these external stakeholder shifts, the Fed has started exploring adaptive strategies, including:
· Repo market interventions to stabilize short-term funding
· “Operation Twist”-style bond maturity adjustments to influence long-end yields
· Stronger coordination with fiscal authorities to manage supply-driven rate spikes
In Stakeholder Theory terms, these are examples of a high-power, high-urgency actor adapting to a loss of influence from key external partners.
📢 Implications for Policymakers
This is not a theoretical threat; it is an emerging reality. The longer BRICS nations move away from U.S. debt, the more likely the Fed will face:
· Constrained response options during crises
· Higher borrowing costs for the government
· Diminished control over inflation expectations
The U.S. needs to seriously consider preserving global confidence in Treasuries, potentially through multilateral reforms, the introduction of new reserve instruments, or the establishment of renewed diplomatic ties with capital-exporting regions.
💬 Your Turn: What’s the Future of U.S. Monetary Policy?
Should the Fed expand its toolkit to counter foreign reserve rebalancing?
Can U.S. monetary policy remain effective in a multipolar currency world?
📚 Select Sources
· Mosharrafa, A. (2024). Policy Transmission in De-Dollarizing Economies
· Nach, P., & Ncwadi, R. (2024). Reserve Behavior of Emerging Markets
· Nakra, A. (2025). Monetary Policy and Multipolar Financial Governance
📌 What’s Next?
In the following article, I’ll explore how institutional investors are rebalancing portfolios in response to Treasury market volatility, an increasingly relevant issue for fund managers, insurance firms, and public pensions.
📍 Follow me for updates from my DBA research.
#BRICS #FederalReserve #DeDollarization #StakeholderTheory #TreasuryYields #MonetaryPolicy #GlobalCapital #DBAResearch #MichaelKamali #ICBMSI2025 #Geoeconomics
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