I read an article that was discussing the Berkshire Hathaway annual meeting. At the event, Warren Buffett made the comment that he is not worried about the US dollar losing its reserve currency status. This is because he sees no viable alternative out there. This is a position that I have heard MANY “experts” express. I am not demeaning Mr. Buffett in any way. If anyone is an expert, it would be him. I am, however, challenging his position in this matter.
I am challenging everyone who has EVER expressed this opinion.
The first problem I have with this position is that it ASSUMES there needs to be one reserve currency. It appears to me that all of the actions taken by BRICS, SCO, etc. are all about trading in local currencies. This would imply that there would not need to be one major reserve currency at all. As a matter of fact, China has come out numerous times and has said they do NOT want the world’s reserve currency- we just don’t pay attention when they talk. Having said this- there could be a major reserve currency again at some point because of the sheer amount of trade being done in one place or another. Think China, India?
The only reason to have a reserve currency is to facilitate trade. If China is trading with Russia it would make sense to hold reserves in Rubles and Yuan. If India is trading with Japan the Rupee and the Yen would be the reserves that they should hold. Since World War 2, the US dollar is the currency that all other currencies and commodities have been compared to and most trade has been settled in dollars as opposed to local currencies. The whole idea that is under attack is that by allowing the USA to have the world’s reserve currency, it is allowing the USA to bully the world not only militarily but also economically. It also allows us to export our inflation to the world. What that actually means is we conjure up cash out of nowhere that creates NOTHING and buy real goods that others produced and because there is more “money” chasing goods the price goes up for everyone. Basically, when the USA “prints” it undermines ANYONE who works and produces goods labor. This is why many work harder and harder and seem to be getting nowhere.
It appears to me that we are heading into a system where major trading partners will start holding reserves in the currencies of the countries that they are trading with and bypass holding the US dollar since they are shunning its use in their day-to-day transactions. This movement is picking up steam and most of the world’s population is in on it.
The entire reason for a reserve currency is being turned on its head. Once critical mass is attained (we are getting closer day by day), there will literally be no dominant world reserve currency.
I am not saying countries will not hold reserves- they will. But they will be holding a basket of currencies with the dollar losing its major share because of transactions being done by countries amongst themselves and in their own currencies. As a matter of fact, the note I wrote about UNICOIN on Monday would be a MAJOR advancement in this area as the idea is to keep the currencies of different nations in balance so that when trade takes place the value received in payment for a good is what was expected. This will not solve the problem of “money from nowhere” but it will likely undermine the dollar.
The reason that a question was asked of Mr. Buffett is that the impact of our losing the dominance of the dollar in international trade cannot be overstated. Anyone who thinks inflation is bad now- I am guessing we haven’t seen anything yet. This extraordinary privilege that the USA has held since 1946 has allowed us to live far beyond our means for decades- and it has gotten FAR worse in the last 20 years as caution has been thrown to the wind and instead of being the richest country in the world we have been turned into paupers. We are the most INDEBTED nation in the world’s history. We are conjuring up cash out of nowhere to pretend that we are still wealthy just like all third-world banana republics do.
Personally, I believe that there is always a plan by those “in charge” and that very little happens by chance. I believe that those really “in charge” want to destroy the dollar to usher in their new system of CBDCs.
The world economy is in freefall the weakest countries are already in turmoil over rising prices and the inability of people to feed their families or feel safe. So far, the USA has been insulated from the economic downturn by being able to ‘print money” at will to disguise the true state of our economy- which is COLLAPSING. While they can massage GDP with government spending and say GDP magically rose, the reality is that we just went Far further into debt and if we were to strip out that spending the collapse would be extremely visible.
In my opinion it is not a question of IF this will come crashing down -but WHEN. We are probably getting very close to that cliff I have been warning about.
I believe you have to ask yourself if all of the massive promises that have been made by governments, cities, states and individuals can be kept. I also think we should be thinking about if just ONE of these groups were to break down what would the impact be on the rest of the economy? We should also be asking how to mitigate the risk of financial assets imploding upon themselves. Personally, I want hard assets that I OWN and that I don’t have to worry about someone else’s promise to repay me. I believe that gold, silver and necessities of daily life are a good place to start- along with having some cash on hand in case of bank closures or market closures because of some unforeseen (but probably planned) future event.
Be Prepared!
Any opinions are those of Mike Savage and not necessarily of those of RJFS or Raymond James. Expressions of opinion are as of this date and are subject to change without notice. The information in this report does not purport to be a complete description of securities, markets or developments referred to in this material. The information has been obtained from sources deemed to be reliable but we do not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. There is no guarantee that these statements, opinions or forecasts provided herein will prove to be correct.
Commodities are generally considered speculative because of the significant potential for investment loss. Commodities are volatile investments and should only be a small part of a diversified portfolio. There may be sharp price fluctuations even during periods when prices are overall rising.
Precious Metals, including gold, are subject to special risks including but not limited to: price may be subject to wide fluctuation, the market is relatively limited, the sources are concentrated in countries that have the potential for instability and the market is unregulated.
Diversification does not ensure gains nor protect against loss. Companies mentioned are being provided for information purposes only and is not a complete description, nor is it a recommendation. Investing involves risk regardless of strategy.
