7/ Conclusion
Accredited investor rules started as a compromise: protect everyday investors while letting businesses raise money privately without public-market bureaucracy. The compromise has gotten louder as private markets grew and public markets shrank in relative importance for early growth. The system likely prevents some harm, but it also concentrates opportunity and relies on wealth as a blunt stand-in for sophistication. Most reform ideas try to keep the protection goal while making access more merit-based or more proportionate to risk. The future is probably “evolution, not abolition”, unless politics decides otherwise, as politics enjoys doing.
Accredited investors are people or institutions regulators find financially able and knowledgeable enough to buy certain private investments. But has this rule forced regular investors to miss out on the greatest investments in financial history? 🧵down below
6/ Real-World Impacts and Examples
Because companies stay private longer, a lot of the “biggest growth” can happen before the public ever gets access, which fuels the sense of a closed club. Venture capital, private equity, hedge funds, and many real estate syndications are structurally built around these eligibility gates. Crowdfunding rules in several places opened a smaller “side door” for non-accredited investors, but usually with strict caps and limits.
Scandals in private markets show the downside of lower transparency: even wealthy investors can be fooled if diligence is weak.
3/ Should we take the DXY at face value?
DXY has its limitations and should not be viewed as the dollar's whole story. Because the index’s composition is heavily skewed toward a few major currencies, it doesn’t include emerging market currencies, like the Mexican peso or China’s renminbi (yuan), even though China is now one of the largest U.S. trading partners. If one needs a more complete picture, there are alternative indices. The U.S. Federal Reserve itself created a “broad” trade-weighted dollar index in the late 1990s to “more accurately reflect the strength of the dollar relative to other world currencies” by including a larger set of currencies and regularly updating weights. Private-sector alternatives also exist; for instance, Bloomberg publishes a Bloomberg Dollar Spot Index that covers a wider range of currencies (accounting for ~81% of U.S. trade, compared to only ~42% for the older DXY basket) and adjusts annually. Ideally, savvy observers supplement the DXY with other measures for a fuller picture.
2/ What Does DXY Measure?
DXY is a composite index that measures the U.S. dollar's value relative to a group of major world currencies. It is calculated as a weighted geometric average of the dollar’s exchange rates with six currencies: the euro (EUR), Japanese yen (JPY), British pound sterling (GBP), Canadian dollar (CAD), Swedish krona (SEK), and Swiss franc (CHF). Each currency in the basket is assigned a fixed weight based roughly on its country’s share of U.S. trade in the 1970s. Notably, the euro carries by far the largest weight (57.6%), followed by the yen (13.6%), pound (11.9%), Canadian dollar (9.1%), Swedish krona (4.2%), and Swiss franc (3.6%). Many of these are now functioning on the Euro. Shockingly, these weights have remained static since 1973. In other words, DXY still reflects the economic landscape of the 1970s, with a heavy emphasis on Europe, and it does not fully capture today’s trade patterns.