USA LOSING WORLD RESERVE CURRENCY STATUS? What This Means for You
TRANSCRIPT FROM VIDEO:
A huge advantage that the USA has had as the world reserve currency is coming to an end. We’ve talked about it a lot, but wait, until you see who is now talking about it, coming up.
I’m Lynette Zang, Chief Market Analyst here at ITM Trading, a full service, physical gold and silver dealer specializing in custom strategies to help you survive and even thrive through the reset that boy, it should be crystal clear to you has already begun and have a very important topic to talk to you about today, which is the world reserve currency status. First, let me start by explaining for those that don’t understand why that even matters. If you are a government or an individual or a corporation going outside of your borders to buy stuff. So fuel lumber medicine, anything you had in the past, no alternative, but to use U.S. Dollars. And therefore the dollar had this had to be held on a global basis and countries all over the world had to buy dollars. But you know, that’s been shifting for quite some time, slowly, so that we don’t see it. And now ultimately, I mean, things always happen slow, slow, slow, and then fast. And quite frankly, in this shift that we’ve already started, the U.S. Is going to be the one that will have the greatest impact…I mean, everybody’s gonna be impacted. There’s really no place to go…but the U.S. Will have the greatest impact because all these years, since the forties, we have enjoyed all these benefits since we are the only country that could print the money to pay their bills. Now, if you or I did it, that would be called counterfeiting. But when a country does it, it’s called being the world reserve currency. So let’s just dig into this extremely, extremely important discussion.
This status is now being overtly threatened, and that means that not only is the inflation, not temporary, but hyperinflation is inevitable, because the reality is, is that reserve currency status does not last forever. And you can see that from this graph. And the reality is that we have enjoyed this position far, far, longer than historically any other country has. Now, I do believe that that’s because of the power that was given to the central bank to control and regulate the speed of the inflation. But this is also why we as the U.S. Is forced to be the lender of last resort. Although the IMF is really the true now lender of last resort, but it’s also why if our central bank declares something many or most other countries must follow suit because their currencies are pegged or connected to our currencies or to the Euro, which was created to take over as the world reserve currency, that’s not gonna happen either. And people also talk about China currency becoming the world reserve currency. That’s not likely to happen either. I’ve said many times and will continue to say that I believe it will be the SDR the IMFs internal currency. That will be, and we’ll talk more about that in just a minute, but keep in mind that the Euro is actually created to take over. You can see, and we’ve talked a lot about the SWIFT system, which is the global U.S. Dollar payment system. You can see in here, this, this just goes back to like 2019, but you can see from this current graph that we now only service less than 40% of global trade through SWIFT. And we have the Euro. A lot of that declined in, started to decline in 2019, right? I mean, timing on some things is pretty interesting, but you can see that the Euro has increased in servicing or serving as the global trade system. So we’ve already lost a lot of that. I mean, it used to be a hundred percent, okay. Used to be a hundred percent that was before 99.
So you could see that that’s been changing quite dramatically and now we’re only down to less than 40%. That’s a little that should tell you how vulnerable we are, right? Because countries have different choices, but let’s look at how this Russia, Ukraine, war threatens the dollars dominance. And, you know, from a really brilliant guy who is Zoltan Pozsar, who works for Credit Suisse. And he’s also the one that pays a lot of attention to the repo and the reverse repo market. So we’ve talked about him in the past, but Russia’s invasion of Ukraine could mark the beginning of a turning point for the U.S. Dollar. Okay. And further wars tend to turn into major junctures for global currencies. I showed you this the other day, there is always a war during a currency regime shift. This is a much bigger regime shift rather than an evolution. It is a complete shift. 71 was more of an evolution, but with Russia losing access to its foreign currency. Reserves a message has been sent to all countries that they can’t count on these money stashes to actually be theirs in the event of tension, because the reality is, if you don’t hold it, you don’t own it. And it is truthfully just that simple. And that’s why you gotta hold gold and you gotta hold, you gotta hold silver, no counterparty risk. And we’re gonna be talking more about counterparties, that’s a question that comes up, so I’m gonna show you more what they mean, but shocker, the whole world, the whole world is looking and going, wow, if you don’t hold it, you don’t own it. Yikes.
As such, it may make less and less sense for global reserve managers to hold dollars for safety. This ain’t safe. It’s a dead instrument. Even if you hold it, you own nothing. You own nothing garbage, garbage as such. It may make less and less sense for global reserve managers to hold dollars for safety, given that they could be taken away right when they’re most needed. But here’s the piece that even this is missing, we have virtually no purchasing power left. So what good do they do you, I mean, it’s kind of like, oh, what, that’s a silver certificate here. Zimbabwe, what is, this is a hundreds, thousands, millions, billions, trillions here is a 10 trillion Zimbabwe dollar bill. It has absolutely no value. I think maybe I paid $8 for it, but I probably only paid like $6 for it. And it’s just as a collector item. It has no, no value. It will never, ever, ever have value again. And that’s the piece, even when they’re talking about this. And even when I listen to a lot of other people, it’s hard to comprehend. I know it, but inflation is telling you the truth. It is not that this food, this energy, this housing, everything that you’re buying, it’s not that those things are worth that much more money. It’s that the dollar which I threw away is worth that much less officially. I’ve shown this so many times, 3 cents out of the original dollar and that’s official, which you and I know means it’s a whole lot worse than that.
So let’s go ahead and move on. Okay. So Russia, isn’t the first country to get this lesson in recent months. All right. So this is just hammering in that lesson, cause we saw it when the U.S. Seized Afghanistans cash assets. Yes we did. This recognition may encourage central banks to diversify away from the dollar. You see why we’re losing that status? I mean, it’s been slowly and that’s the way things happen. They happen slowly until they happen fast. And that’s why I would rather be, I don’t care, 10 years, 20 years too early than even one second too late. Because when you’re one second too late, you lose all choices. Okay? so this recognition may encourage central banks to diversify away from the dollar or try to re-anchor their currencies to assets that are less susceptible to influence from U.S. Or European governments. Huh? What asset do you suppose? That might be? Hmm. I don’t know. Let’s keep going because we’ve talked about this too. This is, this continues from Zoltan. There are different kinds of money inside money and outside money. There’s two different kinds of money. Let’s say Fiat money, government based money or good money. Hmm. The number you see in your bank account. Now he’s talking about inside money, which is what most money is. It is held inside of the system and you, your perception is that you own it, but you don’t really, they owe it to you. So just to bring this down to your level, my level, an individual level, this is what I keep trying to tell you, whether you are a government, a corporation or an individual at the end of the day, all of the rules, all of the laws of nature, still a apply to everybody. Now I can’t print money. The government can, but ultimately they apply. So I want you to understand this so much cause that’s the example that we’re seeing and that we saw in Canada. Don’t forget that the number you see on your bank account, doesn’t represent some kind cash deposit in a vault somewhere. It’s simply a promise from the bank to you that it will pay you that amount. Should you need it. The same concept applies at the sovereign scale. So what just happened in Canada? Those individuals needed that money to buy groceries for their families, to pay their bills, to continue to sustain a standard of living. And the government said nope, you can’t have it. And took it away. Just like that. And the U.S. Government boo, doing the same thing. Again, I’m not taking sides here. I want you to understand this. The whole point of this is for you to see how this impacts you and how vulnerable and susceptible you are. If all of your wealth is held in inside money, if it’s all held in the system and they say, no, who are you gonna call? What are you gonna do? There’s nothing that you can do. That’s why it is so critically important for you to have your wealth, some level of wealth outside of this system in real money and even cash. Let’s see. Oh, okay. I have, I have this dollar bill that I’ve ripped about a thousand times, right? Some level of cash and good money, gold and silver that can always be converted. Then they say no to you with your accounts, you can still go buy food. You can still convert this. You can still barter with this and convert it into Fiat. If you needed to. And you can still buy real wealth income producing assets, you can still function. If you hold real money and even Fiat, a little bit of Fiat, there’s, there’s a percentage formula. You know, we have that set up based upon the historic norms. But if your money is held, if your wealth is held inside the system and it’s tied to dollars. And so number one, if the government says, no, you lose access. Even if you have access, when this loses a hundred percent of its value, it means nothing. Trillion times zero is zero. If a central bank is in a situation like this and the currency is under pressure, would it ever come to having to re-anchor your currency to something like gold?
He’s asking that question because that is the historic norm. Yes. You always have to re-anchor to gold to get that confidence back cause it’s real money. This is why when they do that overnight reset. I mean, if you’re listening to Wall Street, turn the TV off, I’ll listen for you. I’ll let you know what they’re saying, but don’t believe their garbage lies about the value, how much gold and how much silver is worth take advantage of it. But don’t believe it. It’s not true! When we do that overnight revaluation or when the confidence is lost in the dollar… that’ll happen first…And then ultimately we’ll have to do that overnight evaluation because you know, they’re gonna try and say, well, this will solve it. It won’t solve it. Well, let’s do CBDC’s central bank digital currencies that will solve it. It won’t solve it because it won’t change behavior.
And who is going to pay the price. You are gonna pay the price. That’s who’s gonna pay the price. Everybody. All of the little guys will pay the price. I am a tangible gal that has not always been well. That actually has been true, but I have held wealth inside of the system. I’m an ex stock broker. I’m an ex banker. I know the system, but right now I hold the minimum amount that I need to in the inside the system. Cause I don’t wanna take in a away from me. And what’s happening with the central, with the federal reserve kicking countries out of the SWIFT system, eliminating their ability to make their payments. Well, guess what… I’m gonna show you this in just a second, but it’s a domino effect and you only get to play this card once. China will make it a priority to need no U.S. Dollars before for Taiwan. It’s a turning point in monetary history. It is absolutely a turning point. We are at a turning point in monetary history. Do you want to survive this? Because I gotta tell you, this is, this is an opinion. That’s held not on hopium but on history.
Even Powell, the fed chair says war may speed China moves to insulate against the dollar. What he’s really saying is that we may indeed be losing our status as the world reserve currency. He’s admitting it. That’s what’s he’s admitting China has been working on currency matters, says Ukraine war may serve as accelerant to de-dollarization losing the status that’s been going on for some time said Powell of Chinese efforts to insulate themselves from what re described as the same thing they’ve been observing in Russia now, but this may change the trajectory. It slow, slow, slow until it’s fast. Get it done, get it done, get it done.
I can sleep at night. I can feel happy. I can feel joy. I can go to my granddaughter’s birthday party and feel good and not worried because I’ve been working on this for so long. Food, water, energy, security, barterability, wealth, preservation, community, and shelter. I have been focusing on that mantra particularly after 2008. I mean, I had, I’d been accumulating gold and silver because I knew. The formulas to told me. That’s why I came here in June 28th, 2002. I’m here almost 20 years doing this work just here. But I knew that we were at the end of the currencies life cycle cause the formulas told me and they’re smarter than I am. So I believe them when they tell me things. But 2008, I was getting ready to retire. I was gonna go traveling. I was gonna do this. I was gonna do that. And 2008 hit and I went, holy crap. The system just died. So instead, what did I do? I was in a little, two bedroom condo that I could just turn the lock on and go off on my merry way and not worry about anything. Nope. Instead I bought a huge house with a half an acre around me to build gardens on. And the reason why I did the huge houses in case all my children and my family needed to come live here. I didn’t wanna, you know, I didn’t, that wouldn’t have been possible and it wouldn’t have been possible for me to grow food in that little two bedroom condo either. It would’ve been absolutely impossible for me to have water in all those parts of the mantra. So I shifted directions really fast. Well, it’s taken me this long to figure out how to put those gardens in, but I can’t even begin to tell you how grateful I am. And I will also tell, tell you this. I believe that I’m probably more ready. I know I’m more ready. The most, anybody I ever meet or talk to, and yet I still don’t feel fully ready. But if this happened tomorrow, we’d be okay because of the precautions that I’ve already taken for the strategy that I’ve already put in place. If you don’t have a strategy, get one and it could be a random strategy from somebody that hasn’t studied currency life cycles forever like I have, or you could call us, talk to our consultants and get a strategy that actually has a foundation of history and not hopium but you gotta do what you’re comfortable with.
I’m sorry, you’re gonna have to forgive me. I’m a little…
So let’s talk about counterparty and counterparty contagion, because if you don’t hold it, you don’t own it. The world is beginning to realize this and I hope you are too. So you get an negative shock, right? And this could be corporations as well because bank is a corporation. So a negative shock, okay. Banks and Russia are closed out of the SWIFT system. That means they cannot send payments. Right? So in the meantime you’ve had all of these loans going around now, Bank A defaults on Bank B and because Bank A defaulted Bank B defaulted and Bank C, then defaulted and then Bank D defaulted and then Bank E defaulted. And all along these defaults…Bail ins, they’re taking your money because the bank is in default and they need whatever they have and that’s deposit. Where is that? Let me go back to that and reread that to make sure that you fully understand that the number you see on your bank account, doesn’t represent some kind of cash deposit in a vault somewhere. It’s simply a promise from the bank to you that will pay you that amount should you need it. But what if they need it? They’re gonna pay you. No, it’s a promise to pay. And so when I’m talking about counter risk, this is exactly what I’m talking about. Okay. One default it’s like a domino effect. So one goes into a default and then they all end up going into a default and who’s left holding the bag at the end of the day? Did we not remember what happened with AIG back in 2008, when they were bailed out from garbage, garbage derivative bets with taxpayer money, a hundred to a dollar on every dollar, no haircuts. Why? Because of this, because of what you’re seeing right here, contagion, because they had written these derivative bets against all these Goldman Sachs and JP Morgan and on and on and on all these banks. So if AIG did not pay out, then it would’ve been a chain of defaults. So we bailed them out a dollar for a dollar at a hundred percent, no haircut. This is counterparty risk. And if you think that this only impacts the corporations, the banks, Wall Street, this is what they’re trying to prevent from a Lehman moment. This is your Lehman moment, people. This is your Lehman moment because Lehman couldn’t pay the counterparties. The system died in 2008 and now we’re at the final death now it’s just been on life support, but that life support is not working anymore.
Interestingly enough, as I was looking at other things, what you’re looking at here is, is something from Jim records. And he compared gold in SDRs to gold in U.S. Dollars. And what he quest, this goes back to 2018, a new system. This is what he sees, or at least what he saw, then. A new system, based on some hybrid of dollars, gold and SDRs is inevitable. And the question is, since you can look at this shift, is that new monetary order already in place? I have felt from 2009 when China went, what about the SDRs? Cause if you’d have been talking to me before that, I said, well, there’s gonna be a new money, it could be the hoochie-cooch. But once I saw that it was the SDR. When China came out and said, what about the SDR? And I thought, well, that’s it. That makes so much sense because it’s been embedded in the global financial system since 69. So they don’t have to reinvent the wheel. They just have to update the wheel that’s already in place. And I can’t say for sure that it already is, but the SDR composed of a basket of currencies and the ability to put gold in there cause originally that’s what it was.
It was, it was a certain amount of gold makes all the sense in the world, make no mistake about it. The true lender of last resort has been practicing, getting everything to position and setting up to be the SDR and keep in mind that the SDR put in place, what’s called a substitution fund where anybody else in the world can deposit dollar denominated bonds assets, right? And then they are washed and converted into SDR. Denominated assets, easy peasy, except that all those dollars have to come home. Hyperinflation, we will feel it in the U.S. more than anywhere else, but everybody else is gonna be in pain. So let me please remind you of this Bank for International Settlements 2020 study on gold’s part of the reserve system, foreign exchange and the reserve system. And I’m just gonna read this whole thing. First, gold is an asset viewed by many as durable and largely imperishable, which it is it’s indestructible, which renders it free of default risk. Gold is the only case of a financial asset with no counterpart liability, no counterpart liability. Unlike currencies in debt, which are claims on foreign governments or institutions gold kept at home is not subject to political manipulation. Third, gold has been empirically proven to serve as an inflation hedge, at least over longer periods of time and last its most widely recognized feature is its potential value in highly adverse scenarios. This is the so-called war, chest argument do you think we’re in a highly adverse scenario and this is central bank goal purchases. Do what I say, go into the stock market, go into the bond market. Everything’s gonna be fine and dandy. Don’t do what I do. What are they doing now? Now they actually started accumulating gold like I think it was in 2005, right? Well before the 2008 crisis. But you think they don’t know what’s going on? And oh, by the way, as far as Fed chair Powell’s flexibility, then if he’s so flexible, tell me why he can’t pivot, why he’s waiting and allowing inflation to become entrenched in the psyche of the population, which he requires confidence.
I know I’m getting really worked up about this because I can see how close we are to the end. And I want you safe when that happens. I want you protected when that happens. This is what I’ve done for myself. Plus food, water, energy, security, community, and shelter. That’s what I want for you too. You’ll sleep better at night and I’ll sleep better at night. So I really appreciate it when people tell me how much of an impact I’ve had on them and how they’ve gotten into position. I really appreciate that a lot and it warms my heart because this is what I was put on the planet to do.
So if you haven’t yet put that plan in place, please do yourself a favor. Click that count link below, set up a time to meet with one of our consultants and create a plan and have your goals established before you make that call so it can just kind of jumpstart things. So you don’t have to, they can walk you through it and help you if you don’t even know how to create those goals, they’ll ask you questions and they’ll help you figure out what those goals are. But do yourself a favor. Stop waiting if you’ve been waiting, stop waiting if you’ve started, but you haven’t finished. Get it done! Please, please. This may well be your last opportunity please, and make sure that you make comments because this material needs to go out to everybody. So share this, share this, share this.
And you know, it is a hundred bazillion percent time to get your assets covered and get your whole standard of living covered here at ITM trading, we use the wealth shield, which is a really comprehensive strategy, but easy to implement the foundation is gold and silver, but it also addresses food, water, everything that you need to sustain your standard of living, grow your wealth base. And if you are so inclined, like I am leave a legacy. Until next we mean and I mean, this really sincerely please, to be safe out there on so many levels, this is critical to be safe and make sure that you, your family, your wealth, your food, your energy, all of that security, you need security. It’s a time to be safe and until next we meet, please be safe out there. Bye bye.
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Chief Market Analyst, ITM Trading