The Dollar May Crash Faster Than Many Expect. Here’s A Chinese View.

Analysts and authors, myself included, have been warning about the collapse of the dollar as the global reserve currency for years. I described this prospect in my first book, Currency Wars (2011), and in several other books in the years since.

This process can take many years. The decline of sterling as the leading global reserve currency played out over thirty years from 1914 (the beginning of World War I) to 1944 (the Bretton Woods conference). Still, events today are playing out so quickly that the collapse is happening in front of our eyes.

It’s no longer a matter of a major event on the horizon; it’s occurring in real-time.

Russia has just linked the ruble to gold at a rate of 5,000 rubles to one gram of gold. China is discussing with Saudi Arabia the prospect of paying for oil in yuan. Israel is likewise considering taking yuan in exchange for its high-tech exports.

China and Russia are creating new payment systems to avoid U.S. sanctions. Central banks have been net buyers of physical gold since 2010. Countries all over the world are considering dumping dollars for fear that they will be next on the list to have their dollar assets frozen or seized the way the U.S. seized the dollar-denominated assets of the Central Bank of Russia.

What’s the point of holding dollars in your reserve positions if the U.S. can freeze those accounts on a whim? Americans tend to take dollar strength for granted, but that’s a mistake.

It’s helpful at times like this to get a foreign perspective. This article is written by a leading Chinese scholar and monetary advisor to the Chinese government.

The article takes the view that China has overinvested in dollar-denominated assets and should begin to diversify its holdings and reduce its reliance on the dollar. The author points to U.S. financial sanctions as a kind of weaponization of the dollar and warns that weaponization can be turned on any country, not just Russia.

As of now, there is no single global currency that’s in a good position to replace the dollar as the leading reserve currency. But, there is one monetary asset that could replace the dollar in reserve positions, although it’s not one issued by a central bank. That asset is gold.

The world’s central banks and finance ministries will soon reach that same conclusion if they haven’t already. In this state of affairs, the best financial protection is to acquire some physical gold yourself – while you still can.

Corporate leaders and institutional fiduciaries looking to incorporate state of the art predictive analytics to their risk mitigation and strategic analysis should click the link to learn more about Raven Predictive Analytics®.