from Birch Gold Group:
The U.S. dollar has been the world’s reserve currency (as the petrodollar) for decades now, but the current conflict in the Middle East seems to have accelerated the dedollarization trend.
Now, I’m not talking about an immediate radical shift in how the world approaches the dollar. But I am talking about a clear and definite shift away from the dollar, a shift that didn’t start in the last few weeks.
Dedollarization may not sound like a threat to our way of life. Nothing could be farther from the truth. Remember, since the dollar has no intrinsic value, its purchasing power is based on supply and demand. When global demand goes down, prices go up. That’s why I keep talking about this topic. Not because I care whether China pays for Iranian oil with rupees or yuan or dollars. But because our purchasing power is dependent on global dollar demand.
TRUTH LIVES on at https://sgtreport.tv/
And that demand just took a severe blow…
“War Has Caused Lasting Damage to the Dollar System”
Let’s start with the viewpoints of Simon White with Bloomberg on this situation. Now, White isn’t a headline chaser. He doesn’t write clickbait to catch eyeballs on a screen. He’s someone who looks for the deeper drivers in a situation to better understand the whole, and White has written an uncomfortable warning about the state of the U.S. dollar on the world stage.
White says that the dollar’s dominance on the world stage is declining due to a number of factors including higher energy prices and supply constraints and what he calls the “weaponization of the dollar.”
Other people point to the weaponization of the financial system in general with actions such as the Biden administration’s seizing of Russian reserves in the U.S., tariffs and financial sanctions, and, now, spillover from the conflict with Iran that has Iran declaring that any organization which helps to fund the U.S. government (by holding government bonds, for example) is a legitimate war target in their eyes.
All of these conflict efforts from both sides make the world wary of holding dollars both due to concerns about dollar valuation but also due to concern over being targeted for overt violence from Iran simply for investment decisions.
It’s a scary spillover.
White also notes that banks are shifting from keeping their reserves denominated in dollars to keeping larger portions of their reserves in gold.
And if major banks are shifting away from dollars, that makes it less desirable overall. Less dollar demand means less dollar value. That doesn’t just affect central banks, though. That affects you and me, and everyone else who earns or spends dollars. When dollar demand does down, prices go up.
For those who have studied the history of currencies, though, this really shouldn’t be much of a surprise. After all…
We’ve seen this pattern before
Just look at what happened to the value of the British pound sterling after World War I and then, further, during and after the Great Depression.
The pound still has value. It just has significantly less value against other currencies than it used to have.
But this devaluation wasn’t an instantaneous thing. It happened gradually, step by step, over time.
Just like we’re seeing happen with the dollar now.
As I mentioned earlier, the decreasing desirability of the dollar on the world market and the devaluation of the dollar have and will continue to happen gradually. After all, the decline of global dollar reserves goes back to at least 2013.
