A global economic shift, once deemed unthinkable, is now unfolding. The U.S. dollar risks losing its longstanding position as the world's dominant currency. The process of de-dollarization is steadily gaining momentum. Countries are strategically distancing themselves from the once-unchallenged greenback. While this movement is not new, it has found its moment to resonate with unprecedented significance.

The growing momentum of de-dollarization is not going unnoticed. James Rickards is an investment banker and former CIA analyst. He predicts the beginning of the end of dollar dominance will occur when the BRICS Alliance (Brazil, Russia, India, China, South Africa) launches a new gold-backed currency. ¹ He believes this new currency will usurp the dollar's preeminent role as a reserve and international trade currency.

Reasons for the Dollar's Demise:

The BRICS currency may be the final nail in the coffin, but it is the culmination of years of movement away from the dollar. Non-western nations want to move away from the dollar for several reasons.

Weaponization of the Dollar - The weaponization of the dollar against Russia accelerated the drive to de-dollarization. After the invasion of Ukraine, sanctions froze $300 billion of Russia's foreign currency reserves.² Other nations quickly learned the consequences of being on the wrong side of U.S. policy and sought defensive measures.  To protect the value of their reserves, central banks are moving from dollars to sanction-proof gold.

Ruchir Sharma is the Chairman of Rockefeller International. He said, “Most Central Banks tend to hold foreign exchange reserves in other currencies, predominantly the US dollar. But over the last year or so, what they have done is that they have been diversifying and buying gold in a very big way. Central Bank holdings of gold are increasing at the sharpest pace that we have seen in history.”³

Runaway U.S. Debt - The global economy's shift away from the U.S. Dollar may be hastened by the astronomical debt of the United States. The United States' national debt hit a record high of $32 trillion. ⁴ If measures aren't taken, interest payments will eventually consume the entire budget. The U.S. could enter a 'doom loop' of endless borrowing to pay ballooning interest to the exclusion of anything else.⁵ Absent the political will in our divided government, the United States may eventually go broke.  The value of the dollar could drop to near zero, leaving other nations looking for safer stores of value.

Economic Sovereignty - Non-Western nations are seeking to strengthen their own economies by ending their reliance on the dollar for international trade. Typically, transactions between nations would require converting one currency into dollars and then converting those dollars into the second currency. The goal is to enhance the value of trade by eliminating the need for dollars. Removing the dollar from the equation builds the local economy and independence from U.S. influence.

Circle CEO Jeremy Allaire stated, “There’s been this theme of de-dollarization for a long time, and people talk about it every 10 years. And people say it’s not going to really happen. And I think we’re now at a really different place...this is part of the multi-polar world that’s emerging. There’s a desire to have autonomy outside of the dollar."⁶

The BRICS Challenge - The ASEAN group (composed of the Southeast Asian countries) recently made a joint decision to stop using the dollar for international trade. ⁷ But it is the BRICS Alliance proposed currency that is raising eyebrows. The launching their gold-backed currency can be seen as the culmination of de-dollarization. The new currency could devalue the dollar and “affect world trade, direct foreign investment and investor portfolios in dramatic and unforeseen ways,” said Rickards. ⁸

With twenty more nations interested in joining, the BRICS Alliance would cover 30% of the world's surface, 40% of the world's population, and one-third of the global GDP. It would have the size and infrastructure to shift the global economic order. ⁹ Notably, Saudi Arabia is interested in joining. This would mean two of the largest energy producers, Russia and Saudi Arabia, would be in the alliance.  They could bring an end to the petrodollar, where oil must be traded in dollars, and almost guarantee the end of dollar dominance.

The proposed BRICS currency aims to gain credibility by being backed by gold. A new gold-backed global currency could challenge the value of fiat currencies struggling with soaring inflation and interest rates. Gold price projections received a bump from the prospect of a new gold standard. ¹⁰

Debt Protection - Reliance on the dollar constricts the deeply indebted economies of developing nations. And the Fed's aggressive interest rate hikes are only making this debt more expensive. Since the World Bank and the IMF are seen as tools of the US, trapping countries in debt, the BRICS created the rival New Development Bank (NDB). NDB President Dilma Rousseff reiterated the bank's objective is eventual de-dollarization. "In the future, it is unlikely that one single currency can dominate the world’s currency system."¹¹

Impact of De-dollarization

De-dollarization could undermine a pillar of the global economic order. Dollar value is likely to fall dramatically if it is no longer the dominant trade and reserve currency. Dollar-denominated assets like stocks and bonds would plummet as inflation skyrockets. Interest rates would be required to rise to keep financing the national debt. In the end, a collapsing dollar will likely land the country in another depression.

A soaring gold market could be the one positive consequence of de-dollarization. A global gold- backed currency may spark a new bull market for gold. In addition, central banks could keep up their unprecedented pace of gold purchases as they replace dollar reserves with precious metals. Investors, individual and institutional, may flock to gold in record numbers seeking a safe haven asset to replace an unstable dollar. A Gold IRA is an example of a financial instrument that lets people protect their retirement funds from a collapsing dollar with physical precious metals. Investigating the benefits of physical gold now, before the potential decline of the dollar, may be worthwhile for those seeking to secure the value of their portfolios.

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Max Baecker is the President of American Hartford Gold (AHG), the nation’s largest retailer of precious metals. He leads American Hartford Gold’s mission to help clients achieve long-term financial security with physical gold and silver. 

Under his guidance, American Hartford Gold has delivered billions of dollars’ worth of precious metals to thousands of satisfied clients. He has significantly expanded the AHG workforce and opened a third office in Florida.

Max's dedication to upholding American Hartford Gold's industry-leading standards is reflected in its accolades. American Hartford Gold has made four high ranking appearances on the prestigious Inc. 5000 List of America’s Fastest-Growing Private Companies. AHG holds an A+ Rating from the BBB and a 5-Star Rating on Trustpilot with thousands of 5-star American Hartford Gold reviews. American Hartford Gold is the only precious metals company trusted and recommended by Bill O’Reilly.

AHG offers investment-grade gold and silver coins and bars at competitive prices. Clients also benefit from its buy-back commitment with no back-end fees. To learn more, visit American Hartford Gold.

Notes:

1. https://mronline.org/2023/06/09/ex-cia-advisor-predicts-date-when-u-s-dollar-hegemony-will-collapse/

2. https://www.eastasiaforum.org/2022/05/16/the-price-of-the-sanctions-on-russia-for-the-west/

3. https://watcher.guru/news/nations-buying-gold-in-a-move-to-end-reliance-on-the-u-s-dollar

4. https://www.pgpf.org/infographic/the-national-debt-is-now-more-than-32-trillion-what-does-that-mean#:~:text=The%20%2432%20trillion%20gross%20federal,that%20it%20owes%20to%20itself.

5. https://www.investopedia.com/doom-loop-6748009#:~:text=Doom%20Loop%20Causes,-If%20a%20country&text=The%20heavy%20government%20spending%20to,buyers%20for%20its%20sovereign%20debt.

6. https://www.cointribune.com/en/de-dollarization-a-growing-threat-according-to-circle-ceo/

7. https://ustr.gov/issue-areas/trade-organizations/association-southeast-asian-nations-asean#:~:text=These%20countries%20%2D%2D%20Brunei%20Darussalam,population%20of%20647%20million%20people.

8. https://mronline.org/2023/06/09/ex-cia-advisor-predicts-date-when-u-s-dollar-hegemony-will-collapse/

9. https://www.americansecurityproject.org/how-the-growing-appeal-of-brics-challenges-american-influence-abroad/

10. https://www.fxempire.com/forecasts/article/precious-metals-surge-as-brics-gold-backed-currency-fuels-bullish-momentum-whats-next-1361336

11. http://infobrics.org/post/38599