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This article examines the present state of the US Dollar [USD] and the threats to USD dominance as a global currency. There are several different factors to be considered. China and Russia are the prime movers of a movement away from the Dollar, and investors should follow developments in Forex markets.
Debt and Inflation
The federal debt is now well over $30 trillion. The US Debt Clock ( U.S. National Debt Clock: Real Time ) at the present time registers $ 31.4 trillion and rising. Servicing this huge debt with rising interest rates due to the Fed’s war on inflation is going to be a serious problem for the Treasury and has not gone unnoticed. At the same time US inflation has hit records not seen for over 40 years. Investors must take stock of how much inflation is going to affect their wealth. If one’s capital does not increase at least as much as the rate of real inflation, then it is clear that one’s wealth is diminishing. There are several measures of inflation, but it is sure that the Government will espouse the lowest one in order to make it appear that the Administration is doing its job well. Politicians in Washington continue making huge appropriations. For example, US expenditures for Ukraine are likely to surpass $100 billion if the most recent request for funds is approved
How Much Money Has the U.S. Spent on the Russian Proxy War in Ukraine? – The Maine Wire
American leaders do not seem to worry about deficit financing. Their attitude is one of “What, Me Worry?”, made popular by MAD magazine’s hero, Alfred E. Newman. By pursuing irresponsible financial policies the Administration is contributing to weakening the USD.
CBDC
One thing that is currently not receiving a lot of attention is the fact that the US is behind in the race to introduce a Central Bank Digital Currency (CBDC). John M. Mason has clearly pointed this out. The USD may lose its dominant position as a global currency if the Fed does not get a move on,
The Digital Dollar: Here It Comes
The Fed has initiated programs for preparing for a CBDC but is still behind China.
Digital Currency: The Fed Moves toward Monetary Totalitarianism
Gold
An interesting notice is that an EM country, Ghana, is setting up swap arrangements in gold in order to buy oil.
Ghana’s Gold for Oil Deal is Not Good for USD- UPDATED
23 Countries Now Abandoning US Dollar – Truth And Action Many countries are setting up swap arrangements to avoid the USD entirely.
China is increasing its gold holdings, and this could be part of plan against the USD.
China thought to be stockpiling gold to cut greenback dependence
China Confirms It Is “Mystery” Massive Gold Buyer With First Official Purchase In 3 Years
It remains to be seen if gold will be used as a basis for international currencies. Now that Basel III has come into effect, with gold being rated as 100% of its value as a central bank reserve, purchases of physical gold have increased.
China and Russia
Russia has developed an alternative to the SWIFT bank payment system.
Russia and China have plan to bypass SWIFT – Moscow
Russia has also increased its use of the Renminbi and has veered away from the USD
The yuan’s the new dollar as Russia rides to the redback
It is clear that China and Russia are avoiding the USD.
Russian Central Bank reveals shift away from dollar and euro
Eurasia along with the with BRICS is moving away from the USD and creating a new system
The Global South births a new game-changing payment system
Saudi Arabia
A good article on the USD losing its domination as a trading currency is one by Alastair MacLeod on Goldmoney, noting Saudi Arabia as a key player
Winter In Central Europe… And For The Dollar
Saudi Arabia is creating strong economic ties with China
China and Saudi Arabia deepen energy ties
Relations seem to be very warm
Smiling MBS Gives Xi Jinping Lavish Welcome to Saudi Arabia
What the historic China-Arab summits mean for the Middle East
The Saudis are also joining the BRI bandwagon.
Digital Currency: The Fed Moves toward Monetary Totalitarianism
If the Saudis decide to accept yuan for oil, that will mark the beginning of the end of the USD as the dominant global currency.
The Bottom Line
The USD is not going to lose its status immediately. What is likely is that there will be an area that is dominated by the USD, namely the West and American allies like Australia and New Zealand along with the EU, Canada, and Mexico. On the other hand, Asia with China, India, Indonesia, and Russia as the main players will opt for alternatives. Africa and South America will be courted by both areas. The results are likely to be mixed, and presently it is very difficult to predict what the future holds for these continents.
For American investors inflation is the most immediate problem. Diversification carries with it various risks. What is clear at the present time is that Dollar strength gives American investors an advantage if they wish to invest outside the US. Probable future USD weakening will make it more expensive to acquire foreign assets. Imports will cost more, making life more difficult for wage earners. At the same time foreign companies could start acquiring American assets and set up factories in the US. In order for that to happen, the Dollar will have to depreciate by a large margin, American tourists will find it much more expensive to travel abroad while foreigners will likely flock to the US because of the weak Dollar. In short, a depreciated USD will bring along with it a whole series of changes and new situations.
It is clear that the situation of the USD depends on a large number of different factors, both domestic and global. Geopolitical developments will play an important role. The fact that a growing number of market observers are paying attention to the USD is an indication that change is imminent. The proverbial canary in the coal mine is sending a message that something is amiss. The most pessimistic position forecasting a total collapse with hyperinflation – Egon von Greyerz via Gold Von Greyerz:
In The End The Dollar Goes To Zero & The US Defaults – Switzerland.com
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