Will The USD Lose Reserve Currency Status In 15 Years?

June 9, 2021

Stanley Druckenmiller, well-known hedge fund manager, said in a recent interview that he expected the U.S. dollar to lose its reserve currency status within the next 15 years. In my view, that’s a generous estimation; the facts indicate that it is more likely to lose that status within the next 5 years. 

On this topic, it’s important to consider systemic risk. All banks are interconnected; they all use the U.S. dollar as their reserve currency, and there is a massive amount of reserves held in treasury bills, notes, and bonds. Once one domino falls, it’s only a matter of time until the rest follow. 

It is by no means a new phenomenon: we’ve witnessed this time and time again, and the financial system has been able to persevere and press on with the help of stimulus, attempting the best it can to prevent the systemic issue from ever unfolding. However, all that does is delay the inevitable. 

When the inevitable does strike, we’ll witness a widespread shift in the collective mindset as people seek ways to protect their wealth. It is a shift that’s already beginning to materialize, as more people convert their fiat currency to cryptocurrency. But, when that time comes, we’ll see an even bigger shift into precious metals; after all, nothing is more trusted than gold and silver, which have proven their safe-haven status for millennia. 

As this currency crisis unfolds, we’re heading towards an economic collapse that could be worse than the greater depression. 

There’s a kind of destruction on a global basis that happens nearly every 400 years, an event that affects almost everybody on the planet. That is what the incoming great reset appears to be. It’s not just the next Bretton Woods; in fact, it will probably usher in a totally new way to transacting business for everyone. . 

Of course, it’s to be expected that financial watchdogs will pull out all the stops to try to mitigate this crisis. Central banks will attempt to implement new strategies, like Central Bank Digital Currencies, but there is no guarantee that these measures will prevent this crisis from unfolding. 

“Those who cannot remember the past are condemned to repeat it,” Spanish-American philosopher George Santayana said over a decade ago. Those words still ring true. There is nothing wrong with being optimistic about the future, with emerging technologies promising to revolutionize the way we transact and how we interact with almost every aspect of our lives. The problem lies in not understanding the lessons that we’ve learned throughout history. 

Four decades of studying the intricacies of the financial system have revealed a great deal, and I use this knowledge to inform my outlook for the future. What history helps us predict about the future is several fold. 

In the next five years, we’ll witness a steady contraction in the economy on a global basis. There may be some exceptions, but overall, there will be detrimental issues in the food supply, unable to meet the demands of the global market. Of course, where supply and demand meet, is price. Therefore, it’s to be expected that higher food prices are approaching, affecting the standard of living globally. 

The collective standard of living will be lower, forcing people to live within their means, many for the first time in their lifetimes. The job market will thus become increasingly difficult to enter, especially as more automation reduces employment opportunities in a variety of industries. 

There will be an elimination of the middle class for the most part, leaving North America largely as a two-class society consisting of only the wealthy, and everyone else. In this climate, precious metals like gold and silver will be the key to preserving wealth, as they have done for thousands of years. 

I was recently appointed Advisor to As Good As Gold Australia. I joined hosts Brian and Darryl Panes to discuss what history reveals about the future of the economy. You can watch the full interview here

Finally, on energy…

I have stressed this point in the past, but it still deserves mention: everything revolves around energy, and it’s only becoming more important in an age where the world is increasingly reliant on energy for development. Now, there’s cause for alarm, as gas prices continue to rise across the U.S. — significant because there’s indication that it will only get worse, as we head in the wrong direction. 

While alternative energy sources, like solar panels, have provided one solution, they are not as efficient as their counterparts. They’re not renewable as they must be replaced every 25 years. Similarly, the lifespan of windmills is even shorter, not a viable alternative as they are less reliable and require a great deal of rare earth elements — a market that has been completely dominated by China. 

What this tells us is that we’re approaching a rude awakening within the next ten years, about how difficult it will be to obtain cheaper energy; something that the U.S. has relied on for the last century to keep it afloat. 

I recently appeared on The Real Story with Natalie Harp of One America News to discuss the energy crisis in more depth. You can watch the full interview here

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Spanish Conquistadores invaded the Inca Empire in 1528 to steal their silver and gold.

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