The dollar’s status as the top reserve currency in the financial world is currently undergoing seismic shifts accelerated  by the COVID-19 global pandemic and the sanctions put on Russia due to the invasion of Ukraine. The dollar has been losing its global position and Washington’s attempts at papering over the pandemic lockdowns and loss of productivity have only accelerated the pain.   

Nixon brokered the deal with the Saudis establishing the dollar as the exclusive currency of oil markets. Since then, we’ve been able to export our inflation to the oil consumers of the world. That arrangement has been unravelling at the seams. Other nations, specifically the BRICS nations (Brazil, Russia, India, China and South Africa) resent being held hostage to U.S. foreign policy demands and sanctions. Politicians in the rest of the world would kill for the blank checks U.S. politicians get as a result of the petrodollar and they may be closer to getting them. China has been building up the petro-yuan since 2017 and it has been making huge gains since 2022.     

They are actively ramping up efforts to de-dollarize the global energy sector and working with the Saudis to do it. As more regimes buck under the restrictions of U.S. sanctions and dollar privilege, this will only increase.    

Combine all that with the massive spending bills Washington keeps passing, and the quantitative easing the Fed keeps pumping out, and it’s a perfect storm for a global psychological debt limit for the dollar.

Don’t be fooled by the term “stimulus.” Those newly-printed dollars have kept liquidity in the system to mitigate short-term damage and stop the bleeding. Given these recent economic changes, the probability for a new global currency to replace the dollar is greater than ever. 

In a speech given in July 2020, then Secretary of State Mike Pompeo discussed several ways China is infiltrating U.S. and global economic systems.

At first, sending Chinese scientists and engineers to work in American companies and schools seemed friendly, like a move towards openness and cooperation. But a more sinister motive has become apparent. U.S. intellectual property has been stolen, costing millions of jobs. Supply chains have been disrupted as China’s strengthening military has made international waterways more dangerous for trade. American corporations have begun self-censoring messaging so as to not offend the Chinese Communist Party (CPP). And more and more, the U.S. has outsourced manufacturing and critical supply chains to China. 

China has been purchasing U.S. property and companies for decades in a Johnny Cash-style takeover — One Piece at a Time. Consider that China now owns or controls: 

• 70% of acetaminophen used in the U.S.
• 80% of the globe’s heparin, an important anticoagulant and an even higher percentage of antibiotics. 
• A controlling majority in nearly 2,400 U.S. companies including AMC Entertainment, G.E. Appliances, IBM–P.C. Division, Motorola Mobility, and Smithfield Foods.
• More U.S. residential investment real estate than any other foreign country.
• 352,000 acres of American farmland, including a 130,000 tract in Texas near Fort Hood.

Let’s talk about the tract of land in Texas for a moment. This 130,000 acre tract is near the Mexican border and near 3 strategic military bases — Fort Hood, Fort Bliss, and Laughlin Air Force Base. The proposed use is for a wind farm, but that seems unlikely to ever turn a profit. Could they have other motivations? 

China continues its efforts in trying to dethrone the dollar as the world’s reserve currency.  In 2016, the Chinese yuan was accepted into the IMF’s basket of world reserve currencies. And China has wasted no time in creating a Chinese bond backed by the IMF basket of reserve currencies known as Special Drawing Rights (SDR). The Chinese renminbi is now the 5th most held reserve currency in the world. It’s also very interesting that China encourages its citizens to accumulate gold and doesn’t allow gold to leave the country. What do they see in this shiny metal?

Finally, Chinese officials have also instructed China’s financial institutions to sell U.S. Treasuries held in reserve and replace them with the new SDR-backed Chinese bond. Yes, Xi Jinping has dreams of world dominance, and this will have economic, political and military consequences. Any one of these areas could set in motion financial repercussions that impact one’s savings and retirement. The good news about gold is the protection it can provide when world tensions heat up. 

Central banks, led by China and Poland, took 1,037 tonnes of gold off the market in 2023. Central banks tend to buy large amounts of metals and hold them for a long time, leading to supply crunches and higher prices for the rest of the market. There are no signs of this trend slowing in the foreseeable future.

Why gold? Why now? As global tensions heat up, Russian and Chinese central banks are shedding their U.S. Treasuries and converting the proceeds into gold as a safe haven. It is economically strategic in the event of sanctions from the U.S., and therefore, isolation from the majority of global trade. 

Gold reserves also allow central banks to diversify out of an overdependence on U.S. dollar-denominated assets like stocks and bonds. This is a major concern for China especially. China now owns less than a trillion dollars of U.S. Treasuries, notes and bills for the first time in decades. They are accumulating gold in its place. Other countries are following suit: Germany has repatriated their foreign-held gold reserves, and countries like South Korea, Taiwan, Singapore and the Netherlands have all started acquiring gold.     

Isabell Strauss-Kahn, former Lead Financial Officer for the World Bank, summarized the role gold plays for central banks: “All these uncertainties accentuate negative market sentiment and drive central bank investors to reallocate their portfolios away from risky assets to safe-haven assets. This is where gold comes into its own, as it fulfills central banks’ three core objectives: safety, liquidity and return. Gold has been known for centuries to be a safe-haven asset. It carries no credit risk, has little or no correlation with other assets and the price generally increases in times of stress. As such, it offers valuable protection in times of crisis.” 

Social Security was created based on several assumptions in order to make the math work. It made promises that relied on the inputs of many younger workers to support a smaller cohort of retirees at any given time. Life expectancy was 61-65 years in 1935 when Social Security was implemented. At that time, 100 workers supported 3 retirees. Today life expectancy is over 77 years. It’s great news that we are living longer, but at the same time, fertility is in decline, and well below replacement levels. Today, 100 workers are supporting 25 retirees. The math is no longer working and it’s getting worse.

Some say we need the influx of migrants just to maintain a level population. The problem is the migrant population has been a net drain of taxpayer resources, costing Americans up to $451 billion to care for them.

Who is going to work and pay into Social Security to keep it going?

Millennials are the most educated, yet least employed generation yet. They are saddled with crippling amounts of debt — both personal and student loan debt — and escalating healthcare costs at younger and younger ages preventing them from saving for their own retirements. There are increasing demands on the resources retirees depend upon — from both a newly imported immigrant population and our younger generations.

The security of your retirement should not rely on promises made in the very different world of 1935. Many retirees, however, will have no choice, and it could be very destabilizing when and if those promises must be broken to an entire cohort that is not otherwise prepared.

More money printing is the low hanging fruit as far as Washington solutions go. This will yet again devalue the dollars in your pocket and in your savings accounts. Gold is a great inflation fighter, historically speaking, and worth considering for wealth preservation and increased retirement stability.

The U.S. Debt Clock, as of February, 2024, has our total national debt at over $34.2 trillion and counting.

The reality is, debt is sustainable as long as the lenders and borrowers allow it. It is sustainable as long as the debt holders don’t call in their loans all at once. It is sustainable as long as account holders don’t demand all their deposits on the same day. Ah, but every depositor and every debt holder demands some of their deposits and debt on a daily basis. What happens when even THAT fraction of the fractional reserves vanishes?   

You may not need to liquidate your bank account tomorrow. However, you probably have confidence that if you needed $300 in cash at the ATM it would be there for you. If you needed $10,000, it would trigger a reporting requirement, but it would be there. But if you needed significantly more, at what point would the bank struggle to come up with it? At what amount would they need five business days to process your withdrawal request, and what does that mean? Should the monetary system become more and more unstable, look for those benchmarks to come down.      

It has been said many times, possession is 9/10ths of the law. Are you in possession of your money or does the bank control it? You would be a typical American if you answered “The bank, of course” or your brokerage, or IRA custodian or whoever. But should they really be in possession of 100% of it? How much cash do you have on hand? $100 in your wallet? How far would that take you if the banks closed for a while? Is it farfetched to imagine that could happen? What would you do if the ATM withdrawal limit was lowered to $20 a day, or electronic transaction amounts were limited, in effect freezing accounts?     

Enough with the speculation. Here are some FACTS:  Global debt has reached nearly $313 trillion. That’s a “T.” Gross World Product (GWP) is around $100 trillion according to the latest figures. Only about $8 trillion of that actually exists. Keep these facts in mind the next time you hear about negative interest rates — where the bank not only doesn’t have your money, they have to charge you to come up with it at a later date. The fact that banks in Europe and Japan have already been doing this should concern you. And if it comes to America, you should see it as an important signal and prepare accordingly.     

Gold is the oldest currency known to man. Going back to Biblical years, it has always been globally accepted and recognized. It operates beyond all borders and apart from institutions and governments alike, thus making it one of the most recognized stores of value known to man for centuries. 

Remember when the checkout clerk would ask, “will that be cash or check today?” Those were the options. In 1958 Bank of America launched its first credit card. However, it wasn’t until 1966 when the technology was licensed to other financial institutions. By 1985, the first Discover Card purchase was made for $26.77 at a Sears Store in Atlanta. Then, the race was on. The checkout clerk, instead of asking “will that be cash or check?” started asking, “will that be cash or credit”? That was a quantum leap toward a cashless society. We see evidence that the transition from cash to credit is real.

Enter central bank digital currencies. Fully trackable, fully traceable, and also fully programmable. Based on blockchain technology, similar to cryptocurrency, the novel feature of digital dollars is the ability to “turn off” someone’s money with the same ease of shutting down their Facebook account — and possibly for the same reasons — and with the same appeals process, which means possibly none at all. Digital dollars, or CBDCs, could be a dictator’s dream come true. Total control, total authority. No recourse.

Ever have that dream that you’re in math class and you suddenly realize you forgot to put on pants that morning? Everyone is staring at you. You feel awkward and exposed. It’s an extremely uncomfortable feeling. That is how you could feel financially under a digital dollar regime. The digital dollar will expose all financial transactions to whoever pulls the levers behind the curtain. All transactions would go through a digital ledger that the Federal Reserve controls and monitors. The implications and possibilities are staggering.

Financial privacy is a human right not because people necessarily have something to hide or are doing anything wrong. It’s because some things are just private. You don’t walk around with your salary and your credit score emblazoned on your name tag for the same reasons you wear pants to math class and everywhere else.

But it is more than that. They will have the capability to have full control over your dollars. Will your dollars be eligible to spend on a full tank of gas this week? Are you making the right choices at the grocery store or at a restaurant? CBDCs could potentially be used by central banks to manage and control spending in an economy in several potentially abusive ways.