It’s no secret that the world reserve currency, the US dollar (USD), is on borrowed time.
With each passing day, nations that have grown tired of the American government’s behavior, sanctions, tariffs, etc. continue to make moves away from the US dollar.
The BRICS nations, in particular (Brazil, Russia, India, China, and South Africa), have taken steps toward creating a new financial system independent of USD hegemony.
But smaller nations have also managed to ditch the world reserve currency. Venezuela is only the 47th largest economy in the world. But the South American country is also the 3rd largest exporter of oil to the USA. And they have recently made a very bold move against the US dollar.
World Reserve Currency Being Challenged
While the moves against the USD in recent years are too numerous to count, three pressing developments have caught our eye in the last few weeks. Venezuela, Russia, and a handful of European nations have all made statements and acted against the world reserve currency.
Venezuela Stops Using World Reserve Currency
Last week, Venezuela solidified its move away from the USD by pegging the value of its fiat currency, the Bolivar, to its own cryptocurrency, the Petro.
The Petro was created in 2017 and is tied to the price of oil. Therefore, the Bolivar now has an objective anchor to a physical commodity. All other fiat currencies are not anchored in anything at all – they are only measured against the world reserve currency, the USD.
Without the USD as an anchor, the Bolivar could become the new objective standard, a sort of de-facto world reserve currency.
Russian Officials Make Firm Statements Decrying Use of USD
Russia has expressed gratitude toward the US for issuing sanctions recently. Why is this economic superpower and world-class producer of oil, natural gas, and palladium so grateful?
Because it gives them yet another reason to end their reliance on the USD.
Russia will definitely respond to Washington’s latest sanctions and, in particular, it is accelerating efforts to abandon the American currency in trade transactions, said Deputy Foreign Minister Sergei Ryabkov.
“The time has come when we need to go from words to actions, and get rid of the dollar as a means of mutual settlements, and look for other alternatives,” he said in an interview with International Affairs magazine.
While Russia has been painted as an American adversary lately, even alleged allies of America are making plans to ditch the dollar.
European Nations Announce Plans for Alternative to SWIFT and USD
Some of the largest economies in the European Union like Germany and France announced this week that they will soon take action to avoid U.S. sanctions by creating a new payment system that does not include the US dollar.
“With Germany, we are determined to work on an independent European or Franco-German financing tool which would allow us to avoid being the collateral victims of U.S. extra-territorial sanctions,” French Finance Minister Bruno Le Maire said Monday during a meeting with press association AJEF. “I want Europe to be a sovereign continent not a vassal, and that means having totally independent financing instruments that do not today exist.”
implications of a policy like this being enacted are profound. Yet alone is the loss in confidence in the #dollar but at ~60% of #fx reserves a switch to currencies like #Euro & #yuan would have huge asset switch effects:that is if they develop bond MKTS https://t.co/4wJNhutAgp
— Louis J.D Curran (@CurrencyWar1) August 27, 2018
Buying Opportunities Presented While the World Reserve Currency Falters
While the geopolitical climate around the declining use of the USD may be troubling, it provides a unique opportunity for those who can understand and capitalize upon this trend.
GSB is founded on the principle that fiat currencies are failing and that this reality will lead to fantastic opportunities in specific sectors.
Right now, the USD Index is high and the price of cryptos and precious metals are low. The timing has never been more perfect to acquire shares of gold mining stocks and ETFs, physical precious metals, and digital assets.
Americans have the benefit of using the world reserve currency. That benefit might not last much longer. In order to preserve capital, it’s vital to make investments that will thrive in spite of the declining value of fiat currency. This is why we are positioned in precious metals and cryptocurrencies. If you have yet to add these assets to your portfolio, we believe this is an excellent opportunity to buy the dip. View our portfolio, follow our trades and get the monthly newsletter by clicking here.