If you’ve been following the media lately, you’ve seen news headlines like:
“Is the U.S. Dollar’s Dominance Under Threat?” – Morgan Stanley
“Threats Mount to Dollar’s Role as World’s Reserve Currency” – Barron’s
“The dollar could be facing an existential threat” – Investors Chronicle
These are just a few examples of the sentiment surrounding the U.S. dollar right now.
And you might be having a hard time separating fact from fiction…
But the truth is, the U.S. dollar is under threat.
All over the world, trust in the dollar as the currency for payments and reserves is slowly eroding.
From Brazil to China, foreign nations are beginning to turn away from dollar-denominated assets.
This trend isn’t new. In fact, it’s been in motion for the past few years.
That doesn’t mean the dollar is going away as the world’s dominant currency. But it does put your money on shaky grounds.
That’s why this Wednesday, June 21 at 8 p.m. ET, I’m hosting an emergency briefing called Countdown to Chaos. In it, I’ll explain more about the changes happening to our currency… and how you can position yourself ahead of what’s coming.
To sign up for my event, just click here.
Now, in a two-part essay, I’ll discuss why you should pay attention to the wars being waged against the dollar. I’ll also show you how there’s a silver lining for investors who position themselves early…
Trust Is Eroding
In March of last year, the Fed began its series of quick interest rate hikes.
These hurt the value of Treasury bonds that U.S. banks held for liquidity purposes. That created massive paper losses.
But when a large number of depositors take their money out at the same time, these paper losses turn into real ones.
We saw that first with the collapses of Silicon Valley, Signature, and Silvergate Banks. Then, the major European bank Credit Suisse failed shortly afterwards. First Republic Bank was the next one to go belly up. And PacWest looks like it’s on the verge of collapse.
When depositors get really worried about the safety of their money, that can cause a domino effect in the banking sector.
Yet, rising interest rates didn’t just trigger volatility in the banking sector. They contributed to an eroding of trust in the dollar as a payment system globally.
Higher interest rates made borrowing U.S. dollars too expensive. That’s especially true for emerging market countries. It makes paying back their debts even more challenging.
As a result, collectives like Brazil, Russia, India, China, and South Africa (the BRICS) and other countries are increasingly trading with each other using non-dollar currencies.
President Lula of Brazil, the world’s 10th largest economy, announced his intent to reduce Brazil’s reliance on the dollar in foreign trade during his recent visit to China.
India developed a rupee payment system that enables trade settlements away from the dollar. Plus, Indian oil refiners are now using the UAE’s dirham to buy Russian oil, instead of using the U.S. dollar due to sanctions against Russian oil.
Argentina, on the other hand, just announced that it will start paying for Chinese imports in yuan rather than dollars.
You see, Argentina is struggling with inflation. In April of this year, it soared 108.8% year-on-year. This is the highest level since 1991 after rising 104.3% in March. And it’s losing dollar reserves at a fast pace.
At a mere $35 billion, Argentina’s central bank reserves dropped to their lowest level since 2016. In fact, net reserves are almost completely depleted if gold is not taken into account.
The South American country hopes that the currency deal will ease its diminishing dollar reserves. It also hopes this will lessen its dependence on the U.S. dollar.
All of these examples point to how countries are speeding up their efforts to turn away from the dollar. But there’s more to the story…
Foreign Governments Are Dumping U.S. Treasury Bonds
U.S. banks are failing… borrowing costs are rising…
For policy leaders around the world, that’s a problem. They’re afraid of further losses. And they’re looking for a back-up plan that doesn’t put them at the mercy of the U.S. dollar.
That’s why we’re seeing a collapse in foreign holdings of U.S. Treasury bonds.
In fact, foreign treasuries and governments were dumping U.S. Treasuries throughout 2022. At the same time, the Fed was raising rates aggressively.
That is not coincidence. It’s not a conspiracy theory, either. You can follow the money.
Just look at China, for example. It’s the world’s second-largest economy. And it holds the most U.S. Treasuries, second only to Japan.
After the Fed started hiking rates last year, China cut its holdings of Treasuries to its lowest levels in more than a decade. You can see that in the chart below…
China sold nearly $154 billion in U.S. Treasuries between March 2022 and January 2023 alone.
And it’s not just China. Japan, which holds the most Treasuries, sold $125 billion during that period.
But this trend isn’t limited to the financial crisis of the past year. It’s a sign of a global push to move away from the dollar…
Tomorrow, I’ll tell you why pushback against the dollar is gaining steam globally. I’ll also explain what you can do to protect your hard-earned dollars. It involves one little-known asset that has the potential to make your money go up by as much as 50x…
Stay tuned for more.
Regards,
 |
Nomi Prins
Editor, Inside Wall Street with Nomi Prins
P.S. There’s no doubt about it – the U.S. dollar is not as powerful as it once used to be.
And now, the Federal Reserve and financial elites are set to launch a new attack on the dollar…
I’m calling it the Fed’s “final mandate” on the American people.
To maintain power and influence, the Fed is about to unleash a major overhaul of our monetary system.
It will end the dollar as we know it.
That’s why I’m hosting an emergency briefing called Countdown to Chaos this Wednesday, June 21 at 8 p.m. ET. In it, I go into how the Fed is about to change our financial lives forever… and what you can do to stay ahead.
To help you make the most of my special briefing, I’ve prepared a special report called The 722 Bank Bombshell: Is YOUR Bank Next to Fail?
In the report, I reveal seven banks that are on the brink of failure.
This type of research is usually reserved for my premium subscribers. But the upcoming situation is so urgent that I had to share it with all my readers.
To access it, just upgrade to VIP when you sign up for my event instantly here.
I look forward to seeing you on June 21.