Look at the Euro
I get it. Twitter is plastered with Ray Dalio pictures, calling for China to rule the 21st century and have reserve currency status, while at the same time, BRICS is announcing plans to develop a joint currency, so fear and panic over American dominance fading is again front-page news on the Twittersphere.
So, should you run and tell all of your co-workers and neighbors that they’re brainwashed to believe the dollar will remain the reserve currency and that they must own gold and silver and make plans for the dayafter?
You should, but only for pure entertainment purposes, since it will be a funny social experiment. They’ll probably think you lost your mind.
But in all seriousness, is China coming in from behind and trying to bypass the U.S. dollar?
The answer is that they certainly want to expand their reach and deepen their trade relationships around the globe, and one obvious way to do that is to either force other nations that do business with it to trade in Yuan or to form an even broader currency system with the other members of the BRICS association, to show that its major trading partners are in line with its aspirations.
We already have a way of looking at what happens to the dollar, when a large group of nations decide to form a competing currency: the EURO.
Did it break the dollar?
It did not, and the Euro is a major currency accepted by nations worldwide.
One major thing to keep in mind is that the Eurozone is actually a legitimate bloc of countries, whereas BRICS is just an association, nothing official…
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The reasons for de-dollarization are well-documented:
- Unsustainable deficits.
- Weaponization of the banking system and sanctions.
- End of Petrodollar incentives.
But please, don’t think the U.S. is a country in trouble and China is over there swimming in a pool of prosperity.
The truth is, the Yuan is not even a real currency ready to stand on its own two feet. In most ways, it is pegged to the dollar, almost like an index.
A philosophical argument could be made that we don’t even know the value of the Yuan, since it isn’t free-floating in a genuine manner.
Another point to be made is that China is pursuing globalists strategies, because the U.S. is done being policeman of the world. In other words, the U.S. is willingly giving up her role as the army of its allies, so it feels confident enough to forgo its 80-year role as the de-facto military of the West.
The U.S., if left alone, has everything it needs, in-house, to remain a global superpower.
China really doesn’t and that’s why trade and commerce with other nations is much more of an existential threat for the Chinese than to the Americans. That should tell you a lot about how popular the dollar will stay, even if BRICS does form an alternative niche currency, which will probably only be used for big transactions between governments and not with the masses.
I think that if you want to start obsessing over a major risk, it should be how the entire world would alter overnight, if the Treasury department decides that it must use tricks and financial engineering to default on some of its debt payments and obligations. In that very instant, the bonds that Washington has so freely issued the world, to the tune of about $30tn, would no longer be considered risk-free.
That will change the value of gold in dramatic fashion and could be the one thing that sends it to $3,000 or higher.
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