As long as I can recall, there’s been rumblings from the fringe (the more polite term for conspiracy theorists, who seem to be proven right more often these days--but that’s a topic for another post) about the demise of the USD, both in value and as the World’s primary reserve currency. To be certain, the purchasing power of USD steadily erodes by a few percentage points each year as the money supply increases, but I’m referring more to an abrupt and intentional devaluation, similar to what was seen in 1934. In recent years, the rumblings seem to have not only picked up steam, but are starting to emanate from more reputable sources.

In 2010, the UN released a report calling for the abandonment of the U.S. dollar as the main global reserve currency, saying it has been unable to safeguard value. In the early 2010s, multiple countries, including prominent players such as Russia and China, begin attempts to de-dollarize their economies and their FX reserves (and as of today, Russia is doing a pretty good job of it), as well as push for the use of local currencies (rather than USD) in international trade. In 2019, Mark Carney (fmr head of both the Bank of Canada and the Bank of England), gave a speech at the Fed meeting in Jackson Hole, in which he said the world needs to end its risky reliance on the USD.

In 2020, the WEF began pushing its ‘Great Reset’ as a way to emerge from our current multiple crises by resetting our economic and social foundations (and it’s not a stretch to imagine this would include changes to our monetary system, as well). In addition, we saw the IMF Director, Kristalina Georgieva, push for a ‘new’ Bretton Woods moment, implying (to me, at least) significant changes to the current international monetary system and USD primacy. Finally, the introduction of central bank digital currencies (an idea long discussed, but only recently being pilot tested) could drastically alter the role of central banks around the world, possibly reduce or even obviate the role of banks, and render cryptocurrencies worthless.

The final bit to this USD puzzle is the more well-known and massive (and I mean massive) amount of US public debt, currently sitting around $27 trillion (~$4T added in 2020 alone), and with no end in sight. Our debt needs are so large, a Fed official recently stated the Fed will likely continue to buy Treasuries and mortgage debt, “…to ensure orderly trading continues” (I assume that’s Fed-speak for ‘we’ve run out of buyers’). MMT is also gaining traction, and from what little I know about it, if implemented, will also ensure the money keeps flowing. At what point do people begin to suspect this debt will never be repaid? Add to that the future promises we’ve made regarding Social Security and Medicare and our future dollar needs (ostensibly acquired thru more debt) will be staggering.

So, what do you think the US dollar look like in 2 years? 5? 10? And, what’s the best way to preserve wealth if you think (as I do) a rather large and nasty change is headed straight for the dollar? Interested in your thoughts.


Selected links:
https://www.reuters.com/article/us-usa-fed-jacksonhole-carney-idUSKCN1VD28C
https://www.weforum.org/agenda/2020/06/now-is-the-time-for-a-great-reset/
https://www.imf.org/en/News/Articles/2020/10/15/sp101520-a-new-bretton-woods-moment
https://www.wsj.com/articles/fed-official-wonders-whether-treasury-market-can-handle-massive-issuance-alone-11602713864