This is a great summary of why the US dollar’s reign is coming to an end and what it means for average Americans.
Recently the question of “what would it mean?” came up in another thread. I thought this would answer that question.
What will happen if the U.S. dollar’s reign as the world reserve currency comes to an end?
The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through:
1. massive inflation,
2. high interest rates on mortgages and cars,
3. substantial increases in the cost of food, clothing and gasoline and
4. the U.S. government is going to have a much harder time financing its debt. Right now, there is a huge demand for U.S. dollars and for U.S. government debt since countries around the world have to keep huge reserves of U.S. currency lying around for the sake of international trade but what if… the appetite for U.S. dollars and U.S. debt dried up dramatically? That is something to think about.
The following are 10 reasons why the reign of the dollar as the world reserve currency is about to come to an end: #1: China And Japan To Use Own Currencies In Bilateral Trade #2: The BRICS Plan To Use Own Currencies When Trading With Each Other #3: China and Russia Use Own Currencies In Bilateral Trade #4: Use Of Chinese Currency Growing In Africa #5: China and United Arab Emirates To Use Own Currencies In Bilateral Trade #6: India To Use Gold To Buy Oil From Iran #7: Saudi Arabia Likely to Abandon Use of Petrodollar in Dealings With China #8: The United Nations Continues to Push For A New World Reserve Currency #9: The IMF Has Been Pushing For A New World Reserve Currency #10: Most Of The Rest Of The World Hates The United States
It’s just evolution. A lot of countries hold US dollars. The countries mentioned in the article hold a hell of a lot of 'em. Nobody wants to see a massive devaluation of the USD. It’s just a conspiracy theory, as usual based on fear and paranoia.
Only Americans have only USD denominated assets and investments. Perhaps you should think of diversifying, not only your portfolio, but the currencies they are denominated in. Most governments do this, and it might provide a good hedge against potential fluctuations in the exchange rates.
Food cost up? Why? if everything is produced in the US and grown there … a dollar is still a dollar … maybe fuel will make it a bit more expensive, but than they can open wells in Alaska and along the coast, crack more shale …
But thanks to the MASSIVE increase in the dollar money supply more dollars are now chasing the same amount of goods resulting in higher food costs, commodity prices, etc. Ever wonder why stuff’s more expensive now? Here’s a clue.Check out this chart below.
It’s a very confused world right now. Governments printing money in the currency devaluation game. Europe in a tailspin. US economy sputtering its way through a ‘recovery’. The IMF and United Nations might be pushing a world currency to stay relevant, but who cares. There is a growing trend of nation pacts to trade without the dollar.
Motivations can be argued but it’s impossible to deny the US government spending into a deficit of no return. The money supply is being expanded, creating inflation while interest rates are effectively negative, punishing savers and those on fixed incomes. A [not so] lucky few are getting rich[er] while the average american is a clueless lamb for the slaughter. I believe this is by design.
“There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” – John Maynard Keynes 1919
“The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves…This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists’ antagonism toward the gold standard.” – Alan Greenspan 1966
“Paper is poverty,… it is only the ghost of money, and not money itself” – Thomas Jefferson
“Banking was conceived in iniquity and was born in sin. The bankers own the earth. Take it away from them, but leave them the power to create money, and with the flick of the pen they will create enough deposits to buy it back again. However, take it away from them, and all the great fortunes like mine will disappear and they ought to disappear, for this would be a happier and better world to live in. But, if you wish to remain the slaves of bankers and pay the cost of your own slavery, let them continue to create money.” -– Sir Josiah Stamp, Director of the Bank of England (appointed 1928). Reputed to be the 2nd wealthiest man in England at that time.
Fiat currencies historically have a 100% failure rate. Is it different this time?
Economies don’t “die” in some cataclysmic event where productivity ceases to exist. In my opinion the To Big To Fail mentality is one promoted by bankers, for bankers, the rest of us get to suck it in and cope.
I think at some point the rest of the world will realize everyone’s fortune is better when the US is no longer inflicting its debt on the rest of the world.
Interesting reply. Not sure where you get "to big to fail’ , ‘productivity ceasing to exist’, and the ’ US inflicting its debt on the rest of the world’ from my post, but if it makes sense to you…
People and institutions buy debt instruments out of their own free wheel on the free market. There is no ‘inflicting’ or other coercion.
The issue has nothing to do with productivity.
At this point in time, there’s nothing to replace the US dollar.
Beautiful chart to illustrate the increase in the nominal income of families and to prove how incomes had to increase to compensate for the loss of purchasing power of the dollar. This is what we experience as inflation…increasing prices of everyday goods and services (inclu. wages).
If nominal incomes didn’t increase at at least an equal rate to dollar depreciation to compensate for the loss of purchasing power of the dollar, the United States would probably have been a Third World nation today. The value of the dollar has very gradually lost its purchasing power over the course of 99 years.However, the end is in sight; the trend of the dollar is clearly down and should reach its intrinsic value( zero ) in the near future. Its a mathematical certainty.
The idea that the dollar will go down to a theoretical intrinsic value of zero is ridiculous. A dollar is a dollar. You may need 100 dollars to buy a gallon of gas sometime in the future, but by then you’ll probably be earning $300 dollars an hour. I get 650 taiwan dollars for an hour of mucking around, just purchased a monthly subscription to a website for 1000 Japanese yen, hold Euros that are today worth $1.32 each, Aussie dollars which are above parity… these are all nominal values. If you go to Vietnam you will be a millionaire. If the value of the US dollar goes down, you might eventually be a millionaire there as well, but you will be no less rich or poor.
Not to mention in Taiwan income has not increased for the average person/family for over 10 years, however income for the super rich business owners have increased in times of economic prosperity but none of it reflects on the average people…
I’ve read that China had a fiat currency long long time ago, and they abandoned it when it pretty much caused massive devaluation of the currency…
They’re worth about as much as the ghost money that Taiwanese burns on a regular basis.
I feel the pain there. I’m just arguing against the doomsday, end is nigh theory. Especially as it relates to the USD as global reserve currency.
Most of us live in countries that have other currencies, and despite the fact that our currencies are not the ‘global reserve’, we still get by. The OP argued that if the USD lost its global reserve status, that the US would become another Brazil. A lot of Americans think the rest of the world is the third world.
Number 9 is the only concern. When it comes to other countries challenging the US, no comes close (despite the US’s recent downturn), because they are all flawed, and cheat like crazy, so at the end of the day no one really trusts them (take China’s refusal to float the RMB for example).
The US is still king by a long shot and none of us will see that change in our lifetime.
True, because by that time Americans would have lost all confidence in the US dollar and they would do what all people do with worthless paper money…abandon it.
As long as the US maintains a strong economy and military I can’t see the USD falling out of favour. There may be some further devaluation but maybe not. Remember what would happen to other countries if the USD devalued against them. Inflation will also help the US to reduces it’s debt to GDP load.
I’m wondering what happens if interest rates shoot up, servicing the debt gets more difficult.
