While America sleeps, we continue to lose financial ground to those determined to unseat the monopoly of the U.S. currency.
Take for example The People’s Republic of China’s Central Bank’s recent announcement that boosted the United Kingdom’s bid to be a center for offshore trading of Chinese currency. This should not escape your notice as you look at business news headlines. This article further illustrates the gains that are being made by Russia and China to further erode the U.S. Dollar (USD).
For years, the US has had a stranglehold on world trade by forcing cross-border trade between nations to be done in USD. To put it simply, no other currency had the trust and stability that the U.S. Dollar did.
Then, back in the 1970s we got rid of the gold standard and the USD became a fiat paper currency that wasn’t tied to any hard asset—only the “full faith and trust of the U.S. Government.” That was followed in the decades since with ever increasing and massive deficits and a Federal Reserve that doesn’t seem to understand the need for a strong dollar.
It takes time for the long-term impact of some decisions to become evident. It takes time for momentum to build but there becomes a fulcrum point at which it picks up speed quickly and the momentum is difficult to stop. Is the U.S. Dollar fast approaching that fulcrum point?
These three recent events are cause for concern:
- First, Russia and China recently signed one of the largest energy trade deals in history and the trade will not be done in USD.
- Second, China and Russia have been working for years to build allies in the war against the U.S. Dollar. The major barrier has been the lack of a centralized currency exchange that didn’t require the transactions to be exchanged with USD. Now, U.K. is likely to become the leading center for renminbi trade.
- Third, the tensions between Russia and Ukraine have exposed the lack of influence that the U.S. has in Europe. Russia has become a major trading partner for many EU countries and the UK. Those countries are hesitant to march to U.S. orders to shun Russia because so much of their economies depend on that trade.
What does this mean for U.S. investors? I believe it means that we need to broaden our investment horizons. Some say that you need to buy hard assets like gold and silver—and that may be but I don’t see that as the only solution. It is likely that the U.S. Dollar will continue to weaken; and in those situations, investing outside the US may increase profits.
For instance, I have meaningful portions of my clients accounts invested in Canada. And I have the ability, using my proprietary systems, to further expand into markets like the UK, Europe, Australia and Asia. There’s no way to tell for sure what lies ahead, but a prudent money manager seeks to peer into the fog for signs of danger and opportunity.
And that’s why I am bringing this seemingly obscure news story to your attention. Thanks for reading.
Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
