The US dollar is losing its footing, having forsaken its responsibility to defend its gains in favor of virtue agendas that help only themselves.
August 29, 2022
By: Bobby Casey, Managing Director GWP
The reality is, you get a different set of problems. The problem with poverty has to do with not having enough, but stand to lose very little. The problems with wealth is people come for it, and have a lot to lose.
Having wealth isn’t the set-it-and-forget-it life people make it out to be. I guess there could be exceptions, but like anything you win, it’s yours to lose.
If you won a title or a championship, you’re the one who has to defend that. Everyone else is just trying to get it. The dynamics change.
The US found itself in a position of dominance holding the largest reserve currency in the world. It had a strong economy. But somewhere along the line, it got complacent.
The US and even many European countries, are abandoning the post of defending their wins, for ridiculous agenda driven policies like “Climate Change”, economic “resets”, and whatever other beacon of virtue the West chooses to hurl into the sky.
So while the Dutch fight for fertilizer and the Polish wait days for coal, China and Russia keep plugging along incrementally getting stronger.
It should come as no surprise that there are others seeking the position of top reserve currency and otherwise greater economic dominance. It should be even less of a surprise that China is in that mix.
Goodbye Innovation
You’ve heard the adage: necessity is the mother of invention. That’s true to an extent, but hope is the impetus of action. Hopeless people tend to shut down.
Remember the “Great Resignation”? People were leaving their jobs because they were simply fed up. This was concentrated in late 2020 and through 2021.
Borne out of that is the more recent example called “Quiet Quitting”… or what is also being called “Acting Your Wage”. This is when people do the bare minimum not to get fired, but the above and beyond behavior ends.
Not sure how they expect to get promoted that way, and I’m unsure why they wouldn’t just go find a job that pays better if in fact they are worth more, but that’s not the point.
These two phenomena combined with U6 unemployment where people give up looking for a job or are under employed, provides a rather clear picture of hopelessness.
Compound the hopelessness with lock-downs, and the distrust in government brought on by the relentless lying and misleading information they offer, and you have a disaster in the making.
As if all that wasn’t enough, the crippling levels of debt people are under from the pandemic lock-downs to student loans, along with the skyrocketing inflation has people wondering: WHY BOTHER?!
All this to say, if the government kills all hope they will have taken motivation with it. Then they can say goodbye to innovation… and they’ve already said goodbye to manufacturing and fossil fuels. I’ll be very curious to see what’s next.
Renminbi, Anyone?
In March, we mentioned Saudi Arabia’s wondering eye from the US Petro Dollar:
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Saudi Arabia is in active talks with Beijing to price some of its oil sales to China in yuan…
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The talks with China over yuan-priced oil contracts have been off and on for six years but have accelerated this year…
It’s not just Saudi Arabia though:
This is becoming more evident, as headlines confirm Indian companies swapping USDs for Asian currencies, China and Saudi Arabia concluding energy deals outside the slowly dying (and forewarned) petrodollar, and the Russian Central Bank considering buying the currencies of friendly nations like Turkey, India and China.
As commodities like oil (priced-up 30% since 2018) leave places like China and Russia, they can now be purchased with local national currencies (Indian, Brazilian, Turkish) which are then converted into CNY.
This procedure adds massively to China’s FX reserves (especially when oil prices have been rising), thereby allowing its currency to stay strong despite massive capital outflows.
With its FX reserves frozen by the West, Russia, for example, can take its energy profits and Rubles to purchase the currencies of friendly countries like China, India and Turkey to rebuild its reserves outside of the USD.
What’s Next?
If history is any indicator, we could very well have another gold confiscation by the government, on our hands. Franklin Roosevelt seized all privately held gold from US citizens with Executive Order 6102 in 1933. Going on nearly four years of a depression, people were paid almost $21 per Troy ounce for their gold.
What could happen now? With the new digital age, maybe it’s not so analogue anymore. Maybe, it’s as simple as a few buttons and freezing then seizing assets?
Oh no, that couldn’t possibly happen! Okay, but that’s exactly what IS happening in China, and DID happen in Cyprus.
All this to offer two major warnings:
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Don’t be like the US and become careless if not complacent toward your gains and achievements. Protect what you’ve worked for. The responsibility and “problems” that come with managing wealth are real enough.
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The US dollar is not the powerhouse it once was.
What does that mean for regular folks? The Federal Reserve can only print for so long before it declares Weimar 2.0. The Congress can only tax so much before people and businesses alike shut down. At some point, there will be a reckoning.
Perhaps now is the time to consider diversifying not only your holdings, but where you hold them. If you are looking to shift away from the US dollar into something like precious metals or crypto, now is a good time to get started. If you are just trying to get our assets out of politically unstable jurisdictions, now is the time to consider your offshore options.
The coming months and years are going to be rough, but there are ways to mitigate the damage.
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