Now more than ever, there are a lot of questions about the stability and the future of the US dollar. Will the US dollar crash? That’s what we’re going to unpack on today’s show.
You’re going to learn about the relationship between global trade and the US dollar, the departure from the gold standard, and what the Federal Reserve has said about the future of the dollar. Click play to learn more!
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More and more countries are starting to seek autonomy and diversification away from the dollar. Not to mention, in recent history, China has become an economic powerhouse… and sanctions enforced after the invasion of Ukraine have encouraged more and more countries to turn toward other currencies.
Putin announced an intent to create an international currency standard. And even France has been leaning less and less on the US dollar. And these are just a few examples.
When asked about these global issues and their impact on the dollar as the world currency, here’s what Janet Yellen, US Secretary of the Treasury had to say:
“We should expect over time a gradually increased share of other assets in reserve holdings of countries.”
The Federal Reserve itself lists some challenges the dollar is facing. Let’s read it from the source:
- “Sanctions imposed by the United States and its allies on Russia following the invasion of Ukraine may make the dollar less attractive as a reserve currency as geopolitical adversaries fear exposure to U.S. sanctions when relying on the U.S. dollar as a reserve currency.”
- “The euro could become more attractive as a reserve currency in the future. This integration could potentially be accelerated by enhancements to the EU’s sovereign debt market infrastructure and introducing a digital euro.”
- “Another source of challenges to the U.S. dollar’s dominance could be the continued rapid growth of China, which is by far the world’s largest exporter, though it lags the United States by value of imports. Chinese GDP already exceeds U.S. GDP on a purchasing power parity basis and may exceed U.S. GDP in nominal terms in the 2030s.”
Despite these glaring issues, American politicians like to affirm that the dollar’s position as a global currency is strong – but clearly there’s been a slow burn happening behind the scenes for decades. Bit by bit, other countries are trying to establish independence and chip away at the dollar’s role as the most prevalent reserve currency.
Some may argue that the biggest threat to the future of the US dollar is the US government itself. National debt continues to climb at astronomical rates. Mixing high debt with high inflation could very quickly result in a crisis for the dollar.
Regardless of what ultimately happens with the dollar – now is the time to think about how to protect yourself. We’re in an environment with high inflation and tons of economic volatility. Americans are losing their jobs left and right, while debt on both a personal and national level is out of control.
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