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As I wrote two weeks ago, there are a few key reasons why the U.S. Dollar (USD) is the undisputed and only reserve currency in the world.
In 1944, the Bretton Woods Agreement pegged the USD directly to gold. The dollar has been widely considered a store of value on account of America's huge tax base supporting government borrowing. The U.S. has long had a reputation for free markets and a lack of capital controls. Oil and most commodities are priced in dollars. And last but certainly not least, dollars have been used in global trade for more than 100 years.
But all that's changing.
The Bretton Woods Agreement is a relic of World War II and now openly derided as a self-serving American construct. Dollar convertibility into gold ended in 1971.
The United States' national debt is approaching $32 trillion. The potential for default if the debt ceiling isn't raised, as well as a diminishing tax base due to changing demographics and the hollowing out of the country's middle class, puts the whole dollar as a "store of value" concept into questionable territory.
America's markets aren't free anymore. They're increasingly manipulated by the country's privately-owned central bank, the Federal Reserve System, and regulatory regimes controlled by administrations, Congress, and politicians serving the oligarchy of bankers and corporate officers who run the country.
As far as capital controls, what the U.S. has been doing to foreign individuals, corporations, and governments by confiscating their assets without due process, under the guise of sanctions, makes what any other country that tries to control capital flows look like child's play.
The biggest oil importers in the world outside of the U.S. are all trying to make deals to buy oil in their own currencies, not with dollars. Commodity exporters are increasingly accepting payment in dollar-alt (alternative) currencies. And as far as total global trade in dollars, its falling, and increasingly being replaced by new arrangements using new systems set up by some of America's biggest trading bloc partners.
We've reached a point where the hegemony of the dollar is a problem - not just for us, but for the countries now banding together to take it down.
And the most dangerous thing is that investors like you aren't being told how close we are to the dollar's fall. Until now.
So here's what you need to know and how your strategy needs to shift in a post-dollar world.
Foreign Currency Reserves Are Already Declining
Because the dollar has been the currency of choice for global transactions since at least the end of World War II, foreign countries' banks (and more importantly their central banks) end up holding dollar reserves.
In the mid-1970s, US dollars made up 80% of all global reserves.
By the end of 1999, the U.S. dollar's share of foreign central bank global forex (or FX) reserves dropped to 70%, according to IMF data.
At the end of Q4 2022, IMF COFER data (Currency Composition of Official Foreign Exchange Reserves) showed…
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.