Is Dollar Hegemony Nearing Its End?

To expand the American empire and to give it a global advantage in addition to already having the #1 military force, the U.S. unilaterally defaulted on its obligation to back the dollar with gold on August 15, 1971. To ensure the dollar would retain its value, it struck a deal backed by its military might so that OPEC would demand payment for oil exports in U.S, dollars. To ensure the dollar would gain dominance as the world’s reserve currency it necessarily instituted policies that guaranteed growing chronic trade deficits, thus ensuring that overseas dollar liquidity was available for global trade. Policies initiated sent high value added industries abroad causing a hollowing out of America’s middle class who became future Donald Trump votes.

No one knows how long the dollar will remain the leading global currency but the charts on this page suggest its dominance is waning. The chart on your left shows central bank dollar reserves have declined since August 2014 by 4% despite the U.S. running a $3.603 trillion deficit during that time! Hugo Salinas Price notes that the Chinese Central Bank has been selling dollars to buy gold and Chinese citizens have been using those dollars to buy up global assets. The chart lower left shows a gigantic top in terms of global U.S. dollar liquidity (U.S. Monetary base + dollars at Central banks). And the chart directly below shows a recent massive percentage decline in global trade coinciding with Trump’s tariffs on China. This decline in global trade is nearly as severe as it was during the financial crisis! Trump’s policies to “Make America Great Again” by bringing high value industry and jobs back to America require a reversal of trade deficits. By definition that means a reversal of the dominance of the dollar. Might that have something to do with recent gold friendly appointments to the Fed? It’s impossible to predict the timing but the handwriting is on the wall. The dollar’s days are numbered and that can only be bullish for gold.