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The Challenge to the Dollar’s Dominance

Taylor Kenney - ITM Trading Apr 15, 2024

Is the fall of the American empire imminent? From de-dollarization to geopolitical power shifts, Taylor Kenney explores the ripple effects of global alliances moving away from the U.S. currency. Don’t miss out on vital insights to navigate for assets in this impending economic storm.

CHAPTERS:

00:00 De-Dollarization
01:05 Absorbed US Inflation
04:38 BICS Growing Alliances
05:59 US Debt Deepens

TRANSCRIPT:

All great empires fall. The question is, has America’s time finally come? While some might say that the United States’ inevitable collapse is still far off, others insist that it has already started, thanks in large part to dollarization, a massive push away from the dollar spurred on by U.S. overreach and a changing New World Order, threatening not only the value of the currency in your wallet but the stability of the global economy as a whole. But if you understand how a dollar collapse equals the collapse of the great American empire and therefore a global crisis, you will be able to protect your financial security before it’s too late.

I’m Taylor Kenney with ITM Trading, your trusted source for all things gold, silver, and lifelong wealth protection.

The U.S. dollar is at the center of almost all business on Earth. If you were a clothing designer in Colombia and needed to buy cotton from Egypt, most likely you are doing that trade in U.S. dollars. The same goes for most countries because most countries don’t need each other’s currency on a daily basis. In fact, it’s estimated that the U.S. dollar was involved in at least 90% of all international financial transactions in the last 20 years. This position has granted the United States an astronomical amount of power and privilege. Any country with a central bank can create currency, but having the world’s global reserve currency has allowed the United States to print as much as it wants, creating mountains of debt without having to worry too much about going into hyperinflation. This is because all other nations need dollars to trade with, and through this demand for dollars, United States inflation is effectively absorbed by these other countries. On top of all of this, it also gives the U.S. lower borrowing costs, lower commodity prices, and tons of geopolitical power. Simply put, the dollar is the crux of the United States’ power.

So what would happen suddenly if the demand for dollars wasn’t there? The government would not be able to borrow what it needs to, which would result in higher import costs, higher taxes, extreme currency printing, all of which would inevitably result in a collapse of the economy and the U.S. dollar being worthless. In 2008, when the United States housing market collapsed, the entire world was sent into a recession. Imagine what would happen if the entire United States economy collapsed. The world as we know it would never be the same.

So how close are we to having this be a reality? It depends on who you ask. While it might not happen overnight, there is a pervasive arrogance that the United States dollar will always be in high demand. But the facts tell a different story. Although the dollar does remain the world’s leading reserve currency, it is accounting for less and less of foreign reserves in 2022. The United States dollar accounted for roughly 58% of all foreign reserves, down from 78% in 2002, and that number continues to decline. So what’s taking its place? Gold reserves are up from 11% to 15% in the last six years. This shows us that countries are not only losing faith in the U.S. dollar, but that their central banks are also preparing for what could only be described as a currency reset, back to gold.

So why is this happening now? The paradox of all great empires is that they often sow the seeds of their own downfall, which is exactly what’s happening with the United States. The United States doesn’t just project power through its military force, but also through the weaponization of the U.S. dollar. They use it as both a carrot and a stick. Friends of the United States find themselves receiving billions in aid, whereas enemies are locked out of the global financial system. Most recently, unprecedented sanctions on Russia, including the freezing of over $350 billion worth of assets, has shown just how vulnerable other countries are should they misalign with U.S. policy. Rather than hurt Russia, these sanctions have ignited a global alliance of countries who are tired of bowing to the United States and instead are focused on moving away from dollar dominance.

In the case of Russia, the decision to freeze their assets was arguably one of the biggest missteps by the United States, as it proved what many thought otherwise was impossible, that there are alternative options available when it comes to using local currencies and forging new trade alliances. It’s against this backdrop that BRICs, a rapidly growing coalition of countries including Brazil, Russia, India, China, and South Africa, among others, have made tremendous progress in a short period of time on their agenda of a new world order through dollarization. Now, while the BRICs bloc has proposed a new basket of currencies potentially backed by gold, the immediate threat is actually coming from a banding together of using their own currencies to facilitate trade. And now BRICs membership includes Saudi Arabia, who have been pricing their oil exports in gold since 1971, effectively creating a never-ending artificial demand for dollars. But with Saudi Arabia and other OPEC countries considering a move away from the dollar and towards other currencies such as the Chinese yuan, the demand for dollars is in serious jeopardy. A mutiny is taking place in the global world order, and the line to join membership against the United States is only getting longer.

But threats from the East aren’t the only thing the dollar has to worry about. In fact, once again, it’s America’s own decisions that are contributing to its downfall. Being the country that holds the currency that everyone is doing business with, that everyone is depending on to protect their wealth, means that there needs to be faith and trust that the government is reliable. But the unsustainable, ever-climbing debt that has resulted in credit downgrades has made the U.S. dollar look unstable. Not to mention the string of regional bank failures. Large and credible institutions like Silicon Valley Bank and Signature Bank should not be collapsing in the financial capital of the world. In addition, the Federal Reserve’s rate hikes in response to all of the debt and therefore inflation that has occurred has made borrowing costs for U.S. dollars more expensive, causing other countries to seek dollar alternatives. At the end of the day, any reduction in dollar dominance could shatter what little purchasing power the dollar has left, leaving you and your savings vulnerable.

The dollar’s reign is ending, and it’s now being dethroned by not a singular currency but rather a general move away from the U.S. dollar. The central banks understand this, and that’s why they are moving towards gold. They understand that unlike the U.S. dollar, which has already lost almost all of its purchasing power, gold is the only tangible, finite, safe-haven asset that truly protects wealth as a safe store of value.

And this is why it’s so important we continue to educate ourselves. Otherwise, we won’t be asking ourselves the questions that matter. How do you protect the wealth and assets that you already have? How do you sustain your living through all of this? Are you in a position for opportunities at the other end of this crisis? These are the questions you should be asking yourself if you’re not already. If you want to learn more about how to get a strategy in place that makes sense for you to protect yourself from the fall of the U.S. dollar and subsequently the global economy, talk to one of our expert analysts. Click the link below. I learned so much from them every single day, and I know you will too.

As always, thank you so much for being here. I’m Taylor Kenney with ITM Trading. Until next time.

SOURCES:

https://www.federalreserve.gov/econres/notes/feds-notes/the-international-role-of-the-us-dollar-post-covid-edition-20230623.html
https://www.bis.org/publ/qtrpdf/r_qt2212x.htm
https://www.npr.org/2023/06/12/1181062016/dollar-reserve-currency-debt-ceiling-sanctions-china
https://www.bbc.com/news/world-europe-60125659
https://www.businessinsider.com/china-russia-iran-economy-outlook-help-assistance-western-sanctions-oil-2024-3
https://finance.yahoo.com/news/brics-countries-could-swing-economic-040218147.html
https://www.atlanticcouncil.org/blogs/econographics/dedollarization-is-not-just-geopolitics-economic-fundamentals-matter/
https://fred.stlouisfed.org/series/CPIAUCSL
https://finance.yahoo.com/news/us-dollar-value-plummeting-does-162347145.html
https://thecradle.co/articles-id/7242
https://markets.businessinsider.com/news/currencies/dedollarization-china-yuan-dollar-currency-swap-renminbi-saudi-arabia-oil-2023-11
https://markets.businessinsider.com/news/currencies/de-dollarization-dollar-dominance-us-debt-economy-brics-rival-currency-2024-2

Sources & References In This Article

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