The U.S. Dollar will Lose Its Status as the World’s Reserve Currency

The end game of China’s pandemic was likely to do just that: to force the world to acknowledge that the U.S. dollar won’t be the world’s reserve currency forever. It won’t rule even for another decade.

A recent rise in bitcoin, gold, silver and (mining) stocks means we trust cash less and an uncertain future more as the U.S. has ‘lost the war’ to the coronavirus heading into August 2020.

Americans are printing money, living on debt with a broken unemployment system that doesn’t even count people outside the labor force who have dropped out of society. The Fed’s liquidity pump of the stock market shows the U.S. keeps the upper 10% happy at the expense of the lower 90%. Of course this all means the world trusts the U.S. less, including the once almighty U.S. dollar.

When China wages a currency and capital war, it knows it has already won the cold tech war against its only real rival, the United States.

• The dollar, like any foreign exchange rate, is a relative price. As such, it encapsulates a broad constellation of a nation’s value proposition — economic, financial, social, and political — as viewed against comparable characterizations of other nations.
• It follows that shifts in foreign exchange rates capture changes in these relative comparisons — the U.S. versus Europe, the U.S. versus Japan, the U.S. versus China, and so on.
• What we are seeing with the rise of gold and bitcoin is a failing of trust in the U.S. dollar.

A broken small business sector and a distorted American stock market are symptoms of a U.S. currency that could become much aligned in late 2020 and in 2021.

So what do we have here? We have the knowledge that we are witnessing the decline of the U.S. as a global super power. We see the Trump-economics of the times. We have an approaching hurricane for the U.S. dollar’s stability as its begins its descent.

Driven by a potential shift in the U.S. Fed toward an inflationary bias against a backdrop of rising geopolitical tensions, elevated U.S. domestic political and social uncertainty, and a growing second wave of COVID-19 related infections, we could have seen this a mile away.

It’s really simple and it will get worse before it gets better.

• Congress is closing in on another round of fiscal stimulus to shore up the pandemic-ravaged economy. But the Federal Reserve has already swelled its balance sheet by about $2.8 trillion this year. As a result, Goldman strategists have cautioned that U.S. policy is triggering currency “debasement fears” that could end the dollar’s reign as the dominant force in global foreign exchange markets.

When we think about the U.S. economy and its national brand, the U.S. has lived on top of a pyramid of exploitation of the rest of the world. The guy on top does some unwholesome things to stay there.

Where is the $US dollar headed? A 20 percent to 35 percent decline in the value of dollar could well be in the offing. This is couched in terms of the comparison between the U.S. dollar and the currencies of a broad basket of America’s trading partners. And it is a serious matter.

When you take on more national debt and flood your stock market with liquidity, you are doing your currency a huge disservice. When you mismanage a pandemic, the consequences are potentially generational.

• Gold is the currency of last resort, particularly in an environment like the current one where governments are debasing their fiat currencies and pushing real interest rates to all-time lows.

When gold, silver, digital gold (Bitcoin) and mining stocks are going up, it’s a really bad sign. What’s good for gold hoarders is bad for the rest of us.

• Goldman Sachs has warned that the U.S. dollar may lose its status as the world’s reserve currency. The investment bank is bullish on gold as fears over governments debasing their fiat currencies grow and real interest rates are pushed to all-time lows.

Sound the alarm bells. The U.S. dollar is in serious trouble. In the heart of a raging pandemic crouches the decline of a once grandiose nation. Time changes everything.