Prediction: Dollar Will Decline as Reserve Currency

Prediction: Dollar Will Decline as Reserve Currency

Status: Uncertain

“Our frenzy to get out of debt is not going unnoticed. Like a bumbling movie killer digging a ditch in broad daylight, we’re having a hard time keeping the bodies buried. By 2010, it became clear the United States was printing money. Leaders from Brazil and other countries criticized us for an irresponsible flood of cash that caused global food, stock, and real estate prices to sky rocket. That’s why the dollar’s decline as reserve currency has gotten lots of momentum” (p 53).

Econovation, 2011, p53

What Happened

While the dollar hasn’t gone away as reserve currency, tensions with Iran, Russia and China are fueling an acceleration. China has floated its yuan as a potential competitor. It’s success remains in question. Less stable economies are exploring Bitcoin or other crypto options.

The dollar is staying in business because of a slower economic recovery of EU nations, Brexit, and rise of the US as a net exporter of fossil fuels.

Near $1Trillion deficits under the Trump administration, adding to over $21T in existing debt, increases inflation risk and devaluation, which will fuel more aggressive measures.

The EU Just Made A Push To Dislodge The Dollar From Energy Transactions, Dec 2018

The Commission is recommending three actions for EU national governments, central oil stockholding agencies, companies in the energy markets, price-reporting agencies, commodity exchanges, and European financial services companies: the wider use of the euro in energy-related international agreements, transactions, and financial services for energy related projects.

– Cross-border pact in development for direct trade payments in the yuan and the rouble
– Impetus for move is threat of more economic sanctions by the US

Iran Is Ditching The Dollar In Foreign Trade, 2015

Iran switches from dollar to euro for official reporting currency, Apr 2018

Chinese yuan strengthens in reserve currency market, Oct 2018

China Ends 25-Year Wait as Yuan Oil Futures to Start Trading

“Chen said. “For yuan internationalization, of course, it fits the mission, with more and more oil-producing countries moving away from dollar-linked oil contracts.””

Turkey Will Repatriate All Gold From The US In Attempt To Ditch The Dollar

After Venezuela, Germany, Austria and the Netherlands prudently repatriated a substantial portion (if not all) of their physical gold held at the NY Fed or other western central banks in recent years, this morning Turkey also announced that it has decided to repatriate all its gold stored in the US Federal Reserve and deliver it to the Istanbul Stock Exchange, according to reports in Turkey’s Yeni Safak. It won’t be the first time Turkey has asked the NY Fed to ship the country’s gold back: in recent years, Turkey repatriated 220 tons of gold from abroad, of which 28.7 tons was brought back from the US last year.

What’s Next?