There’s been a lot of talk about the demise of the dollar.
Has the threat of de-dollarization been greatly exaggerated? Or is the greenback’s role as the global reserve currency really being threatened?
In this episode of the Money Metals’ Midweek Memo, host Mike Maharrey takes a hard look at the dollar’s status in the context of the recent BRICS summit. He argues that while it doesn’t look like the dollar will go down any time soon, it’s a little early to breathe a sigh of relief.
Mike opens the show describing a comedic omen that occurred while Janet Yelle was giving a speech. As a reporter asked about the status of the dollar as the world’s reserve currency, the Treasury Department seal fell off the podium with a loud series of thuds.
“My first thought was that it was an eerily symbolic moment. Like, even the universe knows that the dollar is in trouble. I thought a commenter on X summed it up nicely. ‘Even the Treasury sign is giving up.'”
But is the dollar really in trouble?
“Given that the BRICS nations wrapped up their fall summit in Kazan, Russia, last week and all of the talk about the bloc’s desire to find dollar alternatives, I thought today would be a good day to delve a little more deeply into that question.”
And then Mike offers a confession.
“I think I misjudged the immediate threat BRICS poses to the dollar, and I’ve probably overstated it in some of my articles over the last year or so.”
But that doesn’t mean we can all breathe a sigh of relief.
“I still think the dollar is in trouble. How long it will take that trouble to really play out and manifest is the $64,000 question.”
Mike goes on to give an overview of the BRICS summit in Kazan, Russia. He summarized it by asserting, “When it comes to unseating the dollar as the reserve currency, the spirit is willing, but the BRICS is weak.“
“In other words, I think a lot of the member countries would love to see the greenback taken down a peg or 50, but it’s easier said than done in a world that runs on dollars. It’s kind of like the people who would like to get rid of oil driving around in big limos and flying on private jets.”
Russia is pushing hard for de-dollarization — for obvious reasons.
“Of course, it’s easy for the Russians to say, ‘Hey, let’s stop using dollars,’ because they are generally barred from using them. That’s not the case for China, India, or any of the other BRICS nations. Yes – they see than danger posed by America’s weaponization of the dollar, but their economies still depend significantly on the global dollar system. So, the willingness of other BRICS nations to push aggressively in that direction seems to be limited, at least for the time being.”
But that’s not to say the BRICS summit rejected de-dollarization. Far from it.
“The idea remains very much on the table. However, it’s becoming increasingly clear that it won’t be a quick easy process – certainly not as quick and clean as Vladimir Putin might like.”
Mike explains some of the sanctions levied on Russia after it invaded Ukraine and pointed out that other countries are watching how the U.S. and her Western allies have weaponized the dollar.
“I’ve used this little analogy before, but think about it – if you think somebody might pull the rug out from under you, wouldn’t you get the rug out of your house? Of course, you would. Minimize risk. So, it’s not just the Russians who see the need for an alternative. The Russians are just more desperate.”
Mike concedes that a willingness to find dollar alternatives doesn’t eliminate the messy politics involved in getting a group of countries who, while they share some interests, aren’t necessarily fast friends.
Nevertheless, the BRICS summit took some small steps in that direction as Mike outlines from the meeting’s “Kazan Declaration.”
“Plenty of rhetoric came out of the meeting indicating that the U.S. shouldn’t think de-dollarization is off the table.”
Mike points out that BRICS isn’t the only threat to the dollar. There are other actions driving de-dollarization that have nothing to do with the economic bloc. For instance, China already has its own cross-border payment system and one of the world’s biggest banks recently signed up.
“The bottom line is whether BRICS develops an alternative system or not – there is plenty of momentum in that direction. We also see it in the growing gold reserves for so many central banks. If you’re going to de-dollarize, you need an alternative, right? Gold is real money. There are a lot of central banks accumulating real money.”
But does any of this even really matter?
Yes. Yes it does.
“Obviously, if the dollar was no longer the world’s reserve currency, it would be a big problem. Here’s the thing – even a small decline in the dollar dominance is problematic for the US. And that’s clearly happening. Why does it matter? Because global demand for dollars has basically propped up the massive federal government and all of its deficit spending. If the dollar wasn’t the reserve, it would be impossible to maintain the warfare and welfare states because it wouldn’t be able to borrow and print so much money.”
Mike explains the ramifications of de-dollarization, pointing out that it would accelerate the depreciation of the U.S. currency. We would feel that in the form of more price inflation. It’s also a big problem for the federal government as it tries to finance its massive debt along with its profligate borrowing and spending.
“The point I really want to drive home is that we don’t have to have BRICS create a new payment system or develop a new currency for the bloc to create problems for the dollar. All we need is a slow bleeding away of dollar dominance. And that’s happening, slowly but surely. And I can’t help but to keep thinking about the old saying – things happen slowly and then all at once.”
That leads to the call to action.
“You need to be prepared for an ever-depreciating dollar. It’s happening. It’s going to keep happening. The only questions are how much and how fast. To protect yourself, you need real money. Not paper fiat that governments can manipulate at their whim to their advantage. Gold and silver with minimal counterparty risk. So, now is a great time to call 800-800-1865 and talk to a Money Metals precious metals specialist.”
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