Contrary to what mainstream media may suggest, the U.S. dollar has gradually declined over the past few decades. On top of this, with key players like Russia and China initiating a campaign for global de-dollarization, the rate of this decline appears to be accelerating. If this push to bypass the dollar were to become successful, it could trigger the most devastating economic collapse ever seen in U.S. history.
As important as it is, most people are unaware of international de-dollarization. Why is this the case? Because the media often aligns with the government’s stance, and so reporting on the potential decline of the dollar’s status could place the American government in a negative light. With that said, this article aims to inform the reader by providing an in-depth look into the possibility of de-dollarization happening and what the effects of that might look like.
Let’s get started with the basics…
What is Global De-Dollarization?
Global de-dollarization refers to the efforts by countries to reduce their dependence on the U.S. dollar for international trade and financial transactions. This involves a range of strategies, such as settling transactions in alternative currencies and investing in assets not directly linked to the U.S. dollar. The movement is driven by factors including political tensions, as well as the formation of economic alliances or groups of countries that have a common interest in developing greater economic independence and stability apart from the American government. If de-dollarization were to occur, the result would be the removal of the dollar as the world’s reserve currency.
The Erosion of the U.S. Dollar – A Slow Process that Will Eventually Destroy America
The total erosion of the dollar or de-dollarization would take some time; it wouldn’t happen suddenly. However, the dollar is, in fact, heading down that path. Those who understand the dynamics know it won’t lose its grip overnight. Why? Because the dollar has highly infiltrated the global financial system and has held its power for decades, boasting the title of the world’s primary reserve currency – this isn’t something that can easily be taken away.
This dollar dominance has provided the United States with considerable control over the global economy, securing its financial stability and international influence. What does this translate to? Well, at the close of last year, almost 60% of the world’s foreign exchange reserves were reported as being tied to the U.S. dollar. This means nations worldwide are compelled to trade, save, and monitor the American dollar to protect their own economies. That said, this financial and economic setup ultimately places foreign nations at the mercy of the U.S. government. This is all starting to shift though, slowly but surely, and when it hits full force, the U.S. economy will pay dearly.
Next, we’ll learn a little about how America was granted such privilege and power.
How the Dollar Became the World’s Reserve Currency?
Although gaining ground before this time, the U.S. dollar solidified its position as the world’s reserve currency through the Bretton Woods Agreement in 1944. This agreement established a gold standard system where most currencies were pegged to a fixed exchange rate with the dollar. However, the dollar held a special status – it was the only currency directly convertible to gold for foreign governments and central banks at a fixed rate, and from there, it would be held in central banks around the world.
To solidify the dollar’s status after the U.S. went off the gold standard in 1971, the American government took additional actions. A key example was the agreement with Saudi Arabia in 1973 to sell oil in U.S. dollars in exchange for military protection. This arrangement, known as the petrodollar system, significantly increased global demand for the dollar as countries needed dollars to purchase oil.
Furthermore, the dollar has also held its dominance by using what some have labeled as protection racket and coercion. This includes the U.S. using its military and economic power to coerce countries into using the dollar in their international transactions. Related to this, it’s been reported that the American government has purposely gone into countries using military force to destabilize their country and currency, making them more dependent on the U.S.
Motivations for International De-Dollarization
The motivations for de-dollarization stem from various concerns shared by global economic players. At the forefront is the fear of the dollar’s weaponization. The U.S. has increasingly used the dollar as a political tool, imposing sanctions and manipulating its financial systems to place pressure on other nations. This economic weaponization has spurred some of the most influential global economies to seek alternatives to the dollar.
It’s clear that other leaders would like to leave the U.S. dollar behind. This was made apparent when Brazil’s president, Lula Silva, publicly stated, “I ask myself every night why all countries have to base their trade on the dollar. Why can’t we trade using our own currencies? Who decided that the dollar would be the dominant currency after the gold standard disappeared?”
In addition to his statement, Silva has strongly criticized the U.S. government’s economic policies that negatively affect poor countries, particularly those in the global South. He specifically condemned U.S.-dominated financial institutions, such as the International Monetary Fund, for trapping developing countries in debt when they know it can never be paid back.
U.S. Government Sanctions are Placing Countries on an Anti-Dollar Crusade
Over the years, and just recently, the United States has threatened countries with sanctions, export controls, currency manipulation charges, and tariffs. Export controls could prevent these nations from accessing key goods or technologies, impacting their economies severely. Some say this isn’t a wise strategy to continue to the extent they have. Why? One key reason other countries are trying to move away from the dollar is because of America’s ability to sanction and punish by weaponizing the dollar. In a sense, the U.S. may be shooting itself in the foot by pushing nations away from the dollar in this manner.
Sanctions on Russia, China, and Other Countries
Sanctioning adversaries such as Iran, Russia, Cuba, Venezuela, Afghanistan, North Korea, and China have highlighted the global desire to move away from reliance on the dollar. The United States escalated this strategy significantly by freezing Russia’s access to $300 billion in liquid foreign exchange reserves following Russia’s invasion of Ukraine in 2022. This was a defining moment – some say the beginning of the end for the U.S. dollar. Why is this the case? Because it has prompted other nations fearful of receiving similar sanctions to seek alternatives to the dollar.
Influential voices are now advocating for the U.S. government to go a step further by taking ownership of these reserves and providing them to Ukraine for post-war reconstruction rather than merely freezing them. This would most certainly be a slap in the face to Russia.
U.S. imposed sanctions have also been placed on Chinese companies for aiding Russia’s war effort. These sanctions were placed on more than a dozen companies in China and Hong Kong for their support of Russia’s war in Ukraine.
These are just a few examples; there are so many more, but I think the point has been made that with the dollar being the world’s reserve currency, the U.S. has the power to bully countries with sanctions and tariffs to shape their actions so that they align with the needs and interests of the U.S. government.
The Biggest Threat to the U.S. Dollar is the Government Itself
The American government is digging its own grave by imposing substantial sanctions on other countries when they go against its narrative. This is the case because, as mentioned, when the United States tries to force countries into submission through economic sanctions, the rest of the world is taking notice and it pushes them further away from the U.S. dollar in an attempt to protect their country, people, and their assets.
On top of all this, one of the biggest threats to the American dollar is the U.S. government itself, with its continued pattern of mixing high debt with high inflation. Also, the national debt is almost 35 trillion dollars and the interest alone on this debt could hit 1.6 trillion dollars by the end of this year.
Key Players in Global De-Dollarization – The BRICS Nations
BRICS is a group that includes five longstanding members – Brazil, Russia, India, China, and South Africa, and five additional countries that joined or were invited in January 2024: Egypt, Ethiopia, Iran, and the UAE. This is a powerful group because, combined, these nations contribute significantly to global crude oil production and exports. They also account for about one-third of the world’s GDP and around 40% of the world’s population. Furthermore, there are another dozen nations, including Thailand, Vietnam, Bangladesh, and others, that have expressed formal interest in joining BRICS, with some already having applied.
What do the BRICS nations have in common? The goal of global de-dollarization – breaking the chains that bound them to the U.S. dollar. Together, they have the power and resources to become one of the most significant threats to Western dominance to date. This shift isn’t about military strength; it’s about economic influence, oil control, computing capability, and trade dynamics – the ultimate instruments of economic warfare.
What caused the formation of BRICS? Many say the BRICS nations were pushed together by the United State’s self-serving actions and abuse of power against other nations.
Clear Signs of Countries Trying to Bypass the U.S. Dollar
Foreign nations are taking steps towards global de-dollarization and China’s decision to buy fewer U.S. Treasury bonds is one of them. Over the years, China’s Central Bank has gradually decreased its holdings of U.S. Treasury securities, falling from a peak of around $1.3 trillion a decade ago to $775 billion as of February of 2024. China is reallocating its investments towards assets like gold, oil, and other base metals. This strategic move demonstrates China’s intention to diversify its reserves and diminish its dependency on the dollar.
The BRICS New Development Bank has released bonds in local currencies instead of the U.S. dollar, aiming to develop an independent payment system. Also, BRICS is creating an independent blockchain-based system called ‘BRICS PAY.’ These actions are certainly a large step forward in the global de-dollarization effort.
China and Russia Join Forces
Another clear sign that countries are trying to turn their backs on the United States and its dollar, is the alliance between Russia and China. Recently, meetings have been held between Russian President Vladimir Putin and Chinese President Xi Jinping that have resulted in a joint statement, “[We] intend to increase interaction and tighten coordination in order to counter Washington’s destructive and hostile course towards the so-called ‘dual containment’ of our countries.”
More Trading Already Taking Place Without the Use of the American Dollar
Trading without using the dollar can be seen in Russia’s recent defense equipment purchase from India, conducted in Indian Rupees. Additionally, in April 2024, Foreign Minister Sergei Lavrov stated that Russia and China have almost entirely eliminated the use of the dollar in their trade, with over 90% of transactions now conducted in their national currencies.
Central Banks Stockpiling Gold
According to the International Monetary Fund, as of Q4 2023, the U.S. dollar makes up 58.41% of the foreign exchange reserves maintained by central banks worldwide, marking a historic low. Meanwhile, gold has eroded some of the dollar’s supremacy. Gold now constitutes an estimated 15% of these reserves, an increase from 11% six years prior. Central banks are increasing their gold reserves to lessen their reliance on the dollar, with China leading the way, buying hoards of gold over recent years.
Impact on the U.S. Economy if it Loses its Reserve Currency Status
As countries gradually move away from the dollar for settlements, the effect is a weakening of the dollar’s dominance. This would cause the United States to lose its ability to gain control of other nations through sanctions, which would be brutal for the U.S. government itself. Additionally, nations like Ethiopia, with its gold reserves; Venezuela, with its vast oil reserves; and countries such as China and Afghanistan, rich in lithium, uranium, and coal, will no longer need to stockpile dollars to purchase oil. When the demand for dollars diminishes like this, it could result in a surge of surplus dollars within the U.S. and trigger a wave of inflation. The U.S. is already facing significant challenges with inflation, which is evident in rising grocery store prices – now, imagine this situation becoming ten times more severe.
Wealth Held in Retirement Accounts Will Diminish
Even though a strong alternative reserve currency might not emerge immediately, more transactions will likely occur in other currencies which could lead to even higher inflation and elevated interest rates never seen before within the United States. This would cause the average person’s assets, which typically signify security and wealth, such as stocks and bonds that sit within a 401(k), to quickly depreciate in value.
If there were to be a shift toward a new BRICS currency that leaves the U.S. dollar in the dust, it could have a significant negative impact on the United States banking sector, the travel and tourism arena, the technology sector, as well as its oil and gas industries. This would all have a catastrophic impact on the American economy.
A Severe Loss of Economic Well-Being Would Occur
The U.S. wouldn’t be able to raise capital the way it has, with the dollar being the world’s reserve currency. It would have to borrow at higher interest rates to finance its debt, making it harder to manage its financial obligations. This could lead to a reduction in government spending on public services and infrastructure. The bottom line is that de-dollarization would lead America, along with the people who live within its borders, to experience a severe loss of economic well-being.
The impact on the American economy would be crippling, to the point where even Trump addressed the issue. In an interview, he stated, “I hate when countries go off the dollar. I would not allow countries to go off the dollar because when we lose that standard that will be like losing a revolutionary war that will be a hit to our country.”
The BRICS Nation’s Global De-Dollarization Campaign is Unstoppable – Are You Financially Prepared?
Global de-dollarization is not merely a conspiracy theory; there are concrete facts demonstrating that the dollar is gradually losing its value, respect, and influence.
The United States government has its own set of reasons for wanting to maintain the dollar’s status as the world’s reserve currency, with the biggest possibly being sanctioning power, as well as unlimited spending and borrowing, which is often referred to as the “exorbitant privilege.” However, while the government is worried about its possible losses, the American people will have their own set of financial troubles if the dollar were to lose its status. The economic losses that everyday people would face could potentially surpass the devastation experienced during the Great Depression.
With all that said, would you be prepared for such an economic loss if the dollar no longer holds its prestigious title? If you’re unsure, now is the time to get your financial affairs in order. There’s still time to build wealth to fall back on, but waiting too long wouldn’t be wise because foreign nations are currently chipping away at their reliance on the dollar. It’s not a matter of “if” the dollar will be dethroned from being the world’s reserve currency; it’s a matter of “when.”
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Invest in Assets Not Tied to the U.S. Dollar
The wisest strategy would be to invest in assets that are not directly tied to the United States dollar. Gold and real estate are stable assets independent of Wall Street and don’t decline whenever the economy falters. If you’re interested in building wealth through a stable cash flowing asset such as real estate, contact a full-service investment company such as SDIRA Wealth to discuss your goals regarding safeguarding your wealth through rental real estate. In the meantime, you can head over to our SDIRA Wealth Program Overview page for more information.
Before you go, dive into the following video that discusses the end of the U.S. dollar:
