GOLD AND THE DOLLAR AS RESERVE CURRENCIES

 

The US dollar became the world's reserve currency after WWII because of what is now called American Exceptionalism. This meant that thr US has/had the world's pre-eminent military along with the world's deepest and most sophisticated financial markets.  So the dollar was the natural choice for reserve currency status - and the dollar was convertible into Gold.  Therefore, Gold was the ultimate reserve currency.

In 1972 when US president Nixon closed the gold window - in other words declined to honor requests (in this case by France) to  exchange  dollars for Gold, the dollar became unhinged from its Gold anchor - which ushered in the Age of Financialization which quickly turned into the Age of Unlimited Debt.  The Age of Unlimited Debt also turned into the Age of Unlimited Wealth Transfer from the working classes and middle management classes that had to qualify stringently for debt to the Financial Classes that could obtain debt on vastly favorable terms.

And those who could obtain enough debt on favorable terms soon discovered they would never be forced to honor - or repay - that debt.  This created a class of Billionaire Debt Barons.

However, through this unprecedented Global Debt Orgy the US has managed to retain Reserve Currency status because our financial system is the one which has been able to originate and control  most of this debt globally through the EuroDollar (debt) market.

Now US Exceptionalism is predicated on the use of the US Dollar as reserve currency.  This is our biggest asset because we are the only nation that can simply print dollars to repay dollar denominated debt.

This game could probably go on for a very long time until massive defaults overwhelmed the system.

UNFORTUNATELY a genereation of exceedingly stupid politicians have done the one thing guaranteed to bring about the demise of the US dollar as reserve currency:

THEY/WE Have WEAPONIZED the dollar.  SANCTIONS AND TARRIFS are the two things you have to avoid if you want to keep the privilege of the reserve currency.

WHY? Because sanctions and tarrifs incentivize other countries to DEDOLLARIZE.  That means stop buying our debt.  And stop settling international deals, especially commodity deals, in dollars.  (among other things.)  And not just the sanctioned and tarrifed countries.  Every country looks at the US and thinks "We could be next.  Better dedollarize."

And through this age of American Exeptionalism every country including the US has kept a huge store of Gold in its central banks as an Reserve Currency of Last Resort.  So the first step in dedollarizing is making sure you have enough gold.

Now countries that have sufferered the weaponization of the US dollar  have banded together in what is known as the BRICS+ nations (which comprise about 3/5 of the world's first and second world economies) and are aggressively DEDOLLARIZING and buying vast amounts of GOLD in preparation for the launch of their own settlement currency and their own transfer systems.

What this means is as they move away from the dollar the US if forced to finance its own debt.  In other words Buy its own debt with its own Central Bank.

This is the ultimate cause of Massive Inflation.  It means the we have to print dollars to finance our debt.

But we print dollars by creating NEW DEBT.  That how it works. The more we have to finance our debt by printing - the more debt we have - and the more debt we need to finance and the more debt we have.  Repeat until financial collapse.

We have shot ourselves in the head and we are continuing to shoot ourselves in the head.

Meanwhile if you want to protect yourself from this institutionalized suicide you might want to do what the central banks of the world are doing.  

Convert some of your dollars into GOLD