Americans have long enjoyed the biggest and best economy the world has ever seen. The US economy has driven innovation and prosperity around the world like nothing else. As such, we’ve been very #blessed
A big part of that prosperity is based on the fact that the world uses our money to do business. The US dollar is the “reserve currency” or standard money for most transactions.
But…what if that comes to an end? How will that impact your Paycheck?
Here are Five Fast Facts on the US dollar as the world’s reserve currency:
- ⚓ A Reserve What? - A reserve currency is the primary currency used by nations and big banks for international transactions. It makes trade easier by avoiding exchange rates, especially on big time items like oil, food, and precious metals. It’s the default vehicle for financial journeys all around the world!
- 💵 The US Dollar - The dollar was named the world’s reserve currency in 1944. Until then, most world currencies were linked to local physical gold stores, but with the US’ economic and military prominence (and it's clear focus on freedom) it was a done deal. Also, the dollar itself was backed by gold, so it was only a small step away. Everyone loves gold!
- 📉 The Slide - In 1971, Nixon unlinked the dollar from gold because there wasn’t enough gold to go around. But the dollar remained the world’s reserve currency going forward. In 2001, the dollar was held as reserve currency by 73% of nations and banks, but since then it’s been on a decline and is now less than 60%. Oy, that stings the nostrils!
- 💨 Acceleration - The downward slide has gotten much faster recently. It’s lost 20% of its market share since 2008, and two dozen nations (led by China and Russia) are now looking at other currencies for their reserve, and working to create a coalition to dethrone “king dollar.” We very much like the sound of “king dollar” and think it should remain!
- 😱 Could It Collapse? - When society views a nation’s currency as no longer holding value, it collapses. The US is the biggest economy in the world (by far) at $23 trillion (China is second at $17 trillion, and Japan is third at $5 trillion). Most think there’s little chance of a collapse in the US dollar. But…collapses happen due to hyperinflation, political instability, and high national debt levels, and we have at least 1.5 of those right now. Should we start cringing yet?
🔥Bottom line: What happens if the US dollar isn’t the world’s reserve currency? It’s speculation, of course, but predictions essentially suggest massive shockwaves through our economy, with the dollar losing almost all of its value compared to other currencies, increasing costs on everything. That means your Paychecks become worth pennies on the dollar.
If you are so inclined, you can take some steps to convert your assets from things like stocks (linked to the dollar) into commodities like gold and silver (inherent physical value), or at least doing some stockpiling of food, water, and energy stores for your own personal use. And dump as much of your debt as you can, since that debt will remain untouched even if the dollar loses value.
It’s not a good situation, and certainly something we should keep our eyes on! But don’t worry, it probably won’t happen. Probably. 🤞😉
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