Is this the end for the US dollar? The US dollar has been the world’s reserve currency for the last 80 years, but now a lot of people are starting to believe that the dollar’s days are numbered. Why? Well, for the first time in decades, other countries are making major moves to decrease their reliance on the dollar.
New alliances are forming
China, the world’s second-largest economy, and Brazil, the world’s eighth-largest, recently announced that they’re ditching the US dollar. From now on, they’re going to be using their own currencies when they trade. France also seems to be moving in a similar direction in its trade with China.
Meanwhile, Russia, the 11th largest economy in the world and the biggest energy producer, has said that it will help China push for the Chinese yuan to become the standard currency for trade across Asia, South America and Africa. But why is this happening?
Well, two reasons. First, the amount of money America is spending every year is getting out of control. You could get away with a lot when you’re the reserve currency. But at some point, the music stops.
Trust in the dollar eroded
And when you’re adding trillions of dollars every single year in new debt, which drives up inflation and debases the currency, other countries are going to get spooked and will no longer trust that the dollar is a safe, predictable store of value.
The second reason for the declining faith in the dollar is due to America’s foreign policy. In particular, the sanctions it has imposed on Russia. You see, when Russia invaded Ukraine, the Biden administration took the unprecedented step of freezing the dollars in Russia’s central bank.
This meant that the dollars that the Russian state and its citizens owned became unusable overnight. This was supposed to break Russia’s economy but didn’t work; the ruble has fully recovered.
Aftermath and outlook
What the sanctions did do was signal to every other country in the world that the dollars they own are not safe and can be taken away from them at any time. Washington’s reckless spending and the weaponization of our currency have motivated countries to move away from the dollar, and if this trend continues and the dollar loses its reserve status, America’s economy will be annihilated.
So, if we want to avoid that, it’s time to stop supporting the same politicians who are leading us down this path of ruin.
