Not all great powers meet a tumultuous end. Some just fade away slowly, at times pathetically, and with a whimper. Sadly, the latter describes the fate of the US Dollar.
There is a world currency, accessible only to financial elites, that has existed albeit in a relatively dormant state since 1969.
The IMF (International Monetary Fund) created it, partly out of its mistrust for the US Dollar. And now that the dollar has been weakening at an alarmingly rapid pace, this world currency is positioned to undermine whatever global credibility the US Dollar has left.
This world money may flood the global economy. And once it does, it will mark the closure of US Dollar dominance.
What do you think will happen when the world’s dominant nations begin sensing this terminal weakness in America’s national currency?
What will happen when the central banks across the world dump the dollar, replacing it with this world money?
- Your stock portfolio won’t hold up. Besides, a stock market crash would be immaterial, as its paper value will already have been completely sapped.
- Your savings account won’t amount to much eithe
- Prices will soar, making it hard for anyone to buy the basic goods needed for survival.
- Government will be scrambling for another source of money, possibly driving up tax rates across the US.
Within the vaults of the IMF lay a 42-page blueprint. In it, there’s a passage that states: “If there were political willingness to do so, these [“world money”] securities could constitute an embryo of global currency.”
If you read between the lines, this is what it is really saying: “With enough political consensus, this world money can be used to replace US dollars in central bank vaults across the globe.”
Think about all of the dollar-denominated assets you own. Money in your bank account. Money in your pocket. Money invested in anything that will eventually be converted back to dollars.
When this new world money usurps the US Dollar’s status, you will wake up one morning to realize that the value of your money--all of it--had just vanished. Your dollar-denominated wealth...gone, overnight.
Enter the SDR
The SDR (short for Special Drawing Rights) is a derivative reserve currency that the IMF created in 1969 to supplement the existing reserves of member countries. As countries were concerned about the limitations of US Dollars and (at one time) gold as a sole means of settling international accounts, SDR’s were created to provide supplemental liquidity.
SDR’s are not new. They include the US Dollar. But their composition also provides a strong indication of the dollar’s strength or weakness. And right now, it is signalling the dollar’s decline.
As of March 2016, the total value of SDR’s stood at 204.1 billion (equivalent to $285 billion). They consisted of the US Dollar (41.73%), Euro (30.93%), Chinese Renminbi (10.92%), Japanese Yen (8.33%), and British Pound (8.09%).
But here’s the thing:
- In January this year (2017) 1 SDR = $1.3366
- Just seven months later, in August, 1 SDR = $1.4182!
The dollar fell by 816 basis points. Why is this significant? Because all four world currencies increased in value, leaving the dollar behind.
This coming October, the Annual Meetings of the Boards of Governors of the World Bank Group (WBG) and the IMF will take place wherein they will discuss SDR valuations. This meeting takes place every five years. And given the severe weakness the dollar has exhibited as compared with its peer currencies, the fate of the dollar’s weighting and valuation looks bleak.
Interestingly, it also coincides with another critical meeting taking place in China, one that also occurs every 5 years--the Communist Party Congress, in which economic strategy will be a major focus. And as we’ve covered in several past articles, China’s stance toward the dollar is contentious and threatening. Remember, we are at economic war with China.
What will you do when the dollar apocalypse takes place?
Gold has been on the rise due to recent geopolitical risks and overextended stock market valuations. SDR’s constitute another threat that may end up violently sideswiping dollar-denominated assets in the midst of this turmoil.
Those of you interested in sparing your hard-earned wealth know where to turn. Real money. Sound money. Safe haven money. Buy gold. China has been importing gold at record levels and with good reason: they are using it against us. It’s what China and Russia will use to destabilize the US Petrodollar. It’s one of the most powerful weapons in their economic arsenal.
Of course, you can also choose to hold onto your dollars...and watch as it abandons you and your wealth.