Can You Survive Dollar De-Dollarization?

23 Oct

Can You Survive Dollar De-Dollarization?

You’ll need Gold and Silver to Do it!

 It’s the question the mainstream financial media should be asking but doesn’t.  While they remain behind events unfolding, year after year the Mises Institute takes dead aim at the economic realities others prefer to ignore.

This month a Mises article asks “Can America Survive Global De-Dollarization?”  We will share a couple of important points, but we prefer to reframe the question, asking if you and your family can survive de-dollarization.

The article focuses on the obvious threat that between purchasing power loss – inflation, depicted on the adjoining chart – and the use of the dollar as a tool of US foreign policy by means of sanctions rendering some foreign-held dollars useless, we could see an avalanche of de-dollarization.

We not only think it is likely as we have been warning, but we also see it as inevitable and indeed already underway.

The loss of the dollar’s preferred status as the preferred unit of global trade, what a French finance minister dubbed an “exorbitant privilege,” it spells reduced demand for dollars, making things more costly for those that need that issue dollar-denominated debt. It will cost the American people dearly:

This would shock the United States economy with massive price increases on consumer goods while crippling the local, state, and federal governments because deficit spending will no longer be possible if no one buys the debt. In this scenario, states like California and New York might find themselves turning to the federal government for some type of bailout while smaller states with more balanced budgets might find themselves wondering why they should be paying the bill for someone else’s reckless spending that they had no part of, which in turn could create a crisis of unity among the United States of America.

As the world repudiates the incredible shrinking dollar, what will replace it?  In truth there is no governmental or national currency that is any more reliable.  We recall one author telling us years ago that when the dollar fails, people will turn to the International Monetary Fund’s sketchy “Special Drawing Rights.”

Not bloody likely.

Deceived by one phony, unbacked made-up currency – the dollar – it is not even conceivable that the SDR, with which people are unfamiliar and which depends on backing by the poor American taxpayers anyway, will rise by acclamation instead.

And in fact, the Mises article notes that another monetary unit is rising instead:


Part of what is propping up the US dollar’s dominance is the fact that there is not an alternative ready to replace it. However, there has been speculation that gold—whose price is up 25% this year—could be that alternative, and the price increase is a reflection of the demand from other countries buying it to fill their central banks.

As the article notes, the end of fiat money, money made of nothing but thin air and a few digital bookkeeping entries will be at hand.  How will you and your family do in this era of a failing currency and declining American solvency?  If you have prepared with gold and silver, as foreign central banks and astute trend watchers are doing, you will have taken prudent steps to insulate yourself as much as possible from the dramatic shift away from the dollar’s exorbitant privilege.  It may have been nice while it lasted and with honest management it might have lasted longer.

But today, it is what it is.  And what it is is over!