Will The US Dollar Remain The Reserve Currency Of The World?

December 28, 2014

The table below shows the transition of each reserve currencies (every 100 years or so)  and the events that were carried out during each transition. Every transition was a period of great suffering marked by economic hardships, revolutions and wars.

gold reserve currencies

Monetary analyst Cullen Roche of Pragmatic Capitalism sagely observes:  “The average reserve currency lasted only 94 years….which is EXACTLY what the USA dollar has lasted!!!  Ergo, our greenback is already living on ‘burrowed time’.  Consequently, it is plausible, possible and probable the greenback will soon materially decline vis-à-vis other major world currencies.  Subsequently, the gold price in US$ will (eventually and inevitably) soar hyperbolically.”

Each country that rose to ultimate global dominance of commerce declined due to an over-saturation point. Fast-forward to today, and there is a remarkably similar situation for the US. The US has 900 military bases in 130 countries and spent over $640 billion in 2013 on military alone. This figure dwarfs all other military spending combined BY ALL OTHER COUNTRIES. The US is no longer the largest creditor nation in the world, but rather the largest debtor nation in the history of the world. China is now the largest creditor nation. Will the 21th century belong to China and the Renminbi/Yuan?

Although the US Dollar remains the number one reserve currency of the world,  the Euro is also considered a major reserve currency.  However, China’s Renminbi is fast becoming a major reserve currency. Additionally, monetary sources in Beijing state there are rumors that the Sino nation has a covert agenda to replace the US greenback with its Renminbi as the global reserve currency of choice. And to achieve this daunting goal, China would have to dump its monumental store of its US$ Reserves. It is imperative to remember that The Peoples Bank of China is the world’s largest holder of US Treasuries, which amount today to US$1.3 Trillion. This action would cause the greenback’s value to tank…vis-à-vis the current gold price soaring.  The following analysis provides ample support for the above observations (click title):

China Goes For The Gold As Beijing Gold Demand Goes Parabolic

Cullen Roche further comments:  “So, will the USA lose its reserve currency status at some point?  Yes.  In fact, it’s already starting to lose its reserve status to Europe and China.  Will it be the end of the world and will it cause everyone to suddenly ditch the dollar?  Probably not.  It just means the USA will produce a lower proportion of global output and therefore, as a matter of accounting, the rest of the world will hold a lower percentage of US dollar denominated financial assets as a percentage of global output.  It’s not the end of the world.  It’s just a sign that market shares change and when you’re #1, well, there’s only one direction to go.”

currency composition of reserve holdingsConclusion

The US Dollar as the world’s major Reserve Currency is already long in the tooth.  Therefore, it is to be expected that international holders of the greenback will slowly and methodically divest themselves of the US$.  Consequently, the gold price in dollars will move inexorably upward. And it logically follows that mammoth countries like China and India will continue to snap up gold to back their own fiat currencies. One must remember China and India are today the world’s largest consumers of gold.

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Founder of Gold-Eagle in January 1997.  Vronsky has over 42 years’ experience in the international investment world, having cut his financial teeth in Wall Street as a financial analyst with White Weld. Vronsky speaks three languages with indifference: English, Spanish and Brazilian Portuguese.  His education includes a degree in Petroleum Engineering from the University of Oklahoma, a Liberal Arts degree from Hartnell College and a MBA in International Business Administration from UCLA – qualifying as Phi Beta Kappa and Tau Beta Pi for high scholastic achievements.  Vronsky believes gold and silver will soon be recognized as legal tender in all 50 US states…and many countries worldwide.  You may reach I. M Vronsky at: vronsky@gold-eagle.com and/or vronsky@bellsouth.net

A medical study in France during the early twentieth century suggests that gold is an effective treatment for rheumatoid arthritis.

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