We Always Knew it Would Come to This!
The Dollar’s Safe Haven Status at Risk!
We read it in The Telegraph headline: Trump’s tariff blitz has put America’s safe haven status at risk.
We knew it would come to this. We knew it was headed our way. Only when didn’t know exactly when it would arrive, and we don’t know exactly how it will unfold. We only know that it looks like this.
The US dollar is losing its global go-to, safe haven status.
Evidence? World central banks have purchased a thousand tons of gold every year for the last three years. It’s hard to miss evidence like that!
Global reserve currencies don’t last forever.
If the US dollar is no longer a safe haven currency for the rest of the world, what is? It’s not the euro. The European Union itself is fraying. And it is not China’s yuan. China’s financial troubles are deeper than are widely reported.
Then the remaining safe haven currency must be gold.
Bloomberg News:
Demand for gold is strengthening, with investors seeking safety as a new trade war unfolds between the world’s top two economies. The precious metal could reach $4,000 an ounce next year — about 25% above current levels — amid a wave of purchasing by central banks and recession risks, according to Goldman Sachs Group Inc.
It is impossible to maintain a world reserve currency in a currency the world no longer trusts. In the beginning, trust in the dollar relied on the assurance that the dollar was backed by gold. Anyone with a $20 dollar bill could exchange it for a $20 gold piece. Or take $200,000 in US paper money and exchange it for 10,000 $20 dollar gold coins.
That convertibility was so trusted that people around the world said that the dollar was as good as gold. But it didn’t stay that way. In 1971 the convertibility of the dollar to gold became a thing of the past.
Now even the paper dollar isn’t safe. It has become a weapon of US foreign policy, which means the dollar accounts can be frozen and rendered unusable. Ask Russia.
China is worried about its dollar holdings now, too. It has been sharply reducing its holdings of US Treasury bonds for a few years. But now, with the Trump trade war, it appears to be dumping dollars in an act of self-protection at an accelerating pace. An analyst at Mizuho Group, one of Japan’s largest financial institutions, has expressed a “high degree of confidence” that China is selling. Japan has raised the prospect of selling its US bonds as a weapond it the trade war as well.
A currency loses trust when its government becomes financially unsound. The US is financially unsound. It is the world’s largest debtor and must devalue the dollar to nominally pay its bills. This devaluation is inevitable. Other currencies of equally poorly managed and indebted countries are no substitute. The only reliable alternative in today’s world is gold.
To learn more about the unfolding of the global monetary system and how to protect yourself, speak with a Republic Monetary Exchange gold and silver professional today.