What is a world reserve currency? A reserve currency or anchor currency is exactly that. The world reserve currency is the currency that is held in significant quantities by major central banks and other monetary authorities as part of their foreign exchange reserves. Being the world currency has had significant advantages for the US since about 1945.
The US dollar has been the backbone of the global economy for decades. The constant need and demand for US dollars allow the US Government to borrow at lower costs. It has allowed the US to print money and export much of that inflation to other countries. That trend is changing as the US dollar is losing its reserve currency status as other countries are deliberately doing more business outside of the dollar and in their other currencies such as the Euro or the Yuan. This change takes time, but we are certainly headed in that direction of fewer US dollar transactions and more commodity transactions bypassing the US dollar. More countries are looking at the US debt and currency as toxic with all of the US debts and obligations outstanding.
Could the US use the world reserve currency status as a weapon? Obviously, for the leaders who have no clue, yes they certainly can. In the past, the US dollar has been weaponized against Iran. Countries also had to be shocked as the Biden administration weaponized and sanctioned Russia over the Ukraine conflict and froze Russian assets. US dollars are now turning into Biden Notes. Please wake us up from this monetary nightmare. Who are these delusional people making decisions about our money?
Big changes in 1945 with Bretton Woods System
In 1944 with World War II coming to an end, a new financial system for the global economy was being figured out. Out of this Bretton Woods Agreement, the World Bank and the International Monetary Fund were born. The US dollar was also tagged as the international reserve currency.
This was over 75 years ago. The United States at Bretton Woods also agreed to fix the value of the dollar to gold at $35 an ounce. Other countries then fixed their currency rate to the dollar. The US dollar was the backbone of the whole currency exchange system. Corruption, monetary policy, and bad government have threatened this status as the reserve currency.
Nixon eliminates the gold standard in 1971
The US Government started running up huge deficits and running out of its gold reserves in the 1960s. Remember the dollar was still backed by gold in the 1960s, although the gold backing was not as strong as it was due to what happened in 1933 by President Roosevelt. In 1971 the government found it too expensive to maintain the promise. And so, in 1971, President Nixon arranged a split between the dollar and gold. The fiat currency experiment started in 1971. The fiat currency experiment is dying in 2023. All paper currencies, backed by absolutely nothing but debt, float in value against one another, losing purchasing power as more and more paper notes are printed out of thin air. This kind of monetary abuse and recklessness has caused the US dollar to lose its purchasing power consistently for decades. And now it’s getting a whole lot worse.
Other countries are doing business outside of the world reserve currency
China and Brazil announced a new currency agreement last week. According to many news outlets, China and Brazil came to a deal to trade in their own currencies and will not use the US dollar as an intermediary. The Brazilian Real will be exchanged with the Chinese Yuan to complete transactions. The US dollar conversion is being bypassed. I would expect more deals like this as countries have seen how our current administration has weaponized the dollar with the recent proof being against Russia.
Russia and Pakistan have done currency deals with China. New investment has been done through China’s Belt and Road Initiative with Russia (BRI). A freight train will begin its journey in Shijiazhuang, China, and go all the way to Moscow. Pakistan has also benefited by doing business with China through the China-Pakistan Economic Corridor (CPEC). China and Russia have affirmed economic cooperation for the next several years. This economic cooperation is focused on the use of “local” currency. China is already Russia’s largest trading partner.
Liquefied natural gas deal was done outside of the US dollar recently
The Chinese Government recently settled its first purchase of liquefied natural gas via the yuan. This transaction contained approximately 65,000 tons of LNG and was sourced from the United Arab Emirates. The China National Offshore Corporation, France’s Total Energies, and the Shanghai Petroleum and Natural Gas Exchange were also involved. Deals like this in yuan outside of the US dollar means a slow death for the US dollar as the world reserve currency.
According to Wolf Street, the US dollar was approximately 85% of global exchange reserves in 1978. By 1991 the dollar’s share of reserve currencies was around 45%. The world regained a little confidence in the dollar as currency reserves bounced back up to 72% around 2000. The Euro arrived and it has been a slow trend down for the US dollar to this date. The US dollar now accounts for about 58% of global currency assets. This trend means that foreign central banks and other foreign official institutions are holding fewer US-dollar-denominated assets. This includes US Treasury securities, US corporate bonds, and US mortgage-backed securities.
Our leaders have become unfit and delusional. They are corrupt and dishonest. We have no great leaders. Donald Trump was the disruptor. The bad orange man is now being arraigned this week to face hush money indictments. The left will do whatever it takes to get him out of the way. New York City, I am embarrassed to say I lived there. I left when the twin towers fell. It just didn’t feel the same. Neither does this country. Our country and our money are headed in the wrong direction. It’s a house of cards waiting to cave in.
The whole system is being torn down. The banking system is sick. The debt levels are obscene. It is a contagion; it is not an isolated occurrence with one badly managed bank. What do you think these pundits are going to say on television? The whole system depends on you allowing the banking system to loan out and trade your money. And when they mess up, your money is gone and they just print more worthless money and give it to their buddies. They will just keep kicking the can down the road as regular folks are destroyed. Nest eggs will be pummeled and ripped apart.
Banking institutions are failing. Fractional banking is a time bomb. The whole system will fail next. It is inevitable. Their answer will be to print more money, more magic accounting tricks, more currency devaluation, more bankruptcies, more defaults, and more stories on how they have things under control. It’s a sham and a mockery. Our answer is to get some assets out of this toxic system and the sick dollar while you can. You are much better off holding gold and silver than relying on these clowns to take care of your money. Yes, that’s right, clowns.
