Tag Archives: Currency

10 Reasons Why The Reign Of The Dollar As The World Reserve Currency Is About To Come To An End

10 Reasons Why The Reign Of The Dollar As The World Reserve Currency Is About To Come To An End

The U.S. dollar has probably been the closest thing to a true global currency that the world has ever seen.  For decades, the use of the U.S. dollar has been absolutely dominant in international trade.  This has had tremendous benefits for the U.S. financial system and for U.S. consumers, and it has given the U.S. government tremendous power and influence around the globe.  Today, more than 60 percent of all foreign currency reserves in the world are in U.S. dollars.  But there are big changes on the horizon.  The mainstream media in the United States has been strangely silent about this, but some of the biggest economies on earth have been making agreements with each other to move away from using the U.S. dollar in international trade.  There are also some oil producing nations which have begun selling oil in currencies other than the U.S. dollar, which is a major threat to the petrodollar system which has been in place for nearly four decades.  And big international institutions such as the UN and the IMF have even been issuing official reports about the need to move away form the U.S. dollar and toward a new global reserve currency.  So the reign of the U.S. dollar as the world reserve currency is definitely being threatened, and the coming shift in international trade is going to have massive implications for the U.S. economy.

A lot of this is being fueled by China.  China has the second largest economy on the face of the earth, and the size of the Chinese economy is projected to pass the size of the U.S. economy by 2016.  In fact, one economist is even projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.

So China is sitting there and wondering why the U.S. dollar should continue to be so preeminent if the Chinese economy is about to become the number one economy on the planet.

Over the past few years, China and other emerging powers such as Russia have been been quietly making agreements to move away from the U.S. dollar in international trade.  The supremacy of the U.S. dollar is not nearly as solid as most Americans believe that it is.

As the U.S. economy continues to fade, it is going to be really hard to argue that the U.S. dollar should continue to function as the primary reserve currency of the world.  Things are rapidly changing, and most Americans have no idea where these trends are taking us.

The following are 10 reasons why the reign of the dollar as the world reserve currency is about to come to an end….

#1 China And Japan Are Dumping the U.S. Dollar In Bilateral Trade

A few months ago, the second largest economy on earth (China) and the third largest economy on earth (Japan) struck a deal which will promote the use of their own currencies (rather than the U.S. dollar) when trading with each other.  This was an incredibly important agreement that was virtually totally ignored by the U.S. media.  The following is from a BBC report about that agreement….

China and Japan have unveiled plans to promote direct exchange of their currencies in a bid to cut costs for companies and boost bilateral trade.

The deal will allow firms to convert the Chinese and Japanese currencies directly into each other.

Currently businesses in both countries need to buy US dollars before converting them into the desired currency, adding extra costs.

#2 The BRICS (Brazil, Russia, India, China, South Africa) Plan To Start Using Their Own Currencies When Trading With Each Other

The BRICS continue to flex their muscles.  A new agreement will promote the use of their own national currencies when trading with each other rather than the U.S. dollar.  The following is from a news source in India….

The five major emerging economies of BRICS — Brazil, Russia, India, China and South Africa — are set to inject greater economic momentum into their grouping by signing two pacts for promoting intra-BRICS trade at the fourth summit of their leaders here Thursday.

The two agreements that will enable credit facility in local currency for businesses of BRICS countries will be signed in the presence of the leaders of the five countries, Sudhir Vyas, secretary (economic relations) in the external affairs ministry, told reporters here.

The pacts are expected to scale up intra-BRICS trade which has been growing at the rate of 28 percent over the last few years, but at $230 billion, remains much below the potential of the five economic powerhouses.

#3 The Russia/China Currency Agreement

Russia and China have been using their own national currencies when trading with each other for more than a year now.  Leaders from both Russia and China have been strongly advocating for a new global reserve currency for several years, and both nations seem determined to break the power that the U.S. dollar has over international trade.

#4 The Growing Use Of Chinese Currency In Africa

Who do you think is Africa’s biggest trading partner?

It isn’t the United States.

In 2009, China became Africa’s biggest trading partner, and China is now aggressively seeking to expand the use of Chinese currency on that continent.

A report from Africa’s largest bank, Standard Bank, recently stated the following….

“We expect at least $100 billion (about R768 billion) in Sino-African trade – more than the total bilateral trade between China and Africa in 2010 – to be settled in the renminbi by 2015.”

China seems absolutely determined to change the way that international trade is done.  At this point, approximately 70,000 Chinese companies are using Chinese currency in cross-border transactions.

#5 The China/United Arab Emirates Deal

China and the United Arab Emirates have agreed to ditch the U.S. dollar and use their own currencies in oil transactions with each other.

The UAE is a fairly small player, but this is definitely a threat to the petrodollar system.  What will happen to the petrodollar if other oil producing countries in the Middle East follow suit?

#6 Iran

Iran has been one of the most aggressive nations when it comes to moving away from the U.S. dollar in international trade.  For example, it has been reported that India will begin to use gold to buy oil from Iran.

Tensions between the U.S. and Iran are not likely to go away any time soon, and Iran is likely to continue to do what it can to inflict pain on the United States in the financial world.

#7 The China/Saudi Arabia Relationship

Who imports the most oil from Saudi Arabia?

It is not the United States.

Rather, it is China.

As I wrote about the other day, China imported 1.39 million barrels of oil per day from Saudi Arabia in February, which was a 39 percent increase from one year earlier.

Saudi Arabia and China have teamed up to construct a massive new oil refinery in Saudi Arabia, and leaders from both nations have been working to aggressively expand trade between the two nations.

So how long is Saudi Arabia going to stick with the petrodollar if China is their most important customer?

That is a very important question.

#8 The United Nations Has Been Pushing For A New World Reserve Currency

The United Nations has been issuing reports that openly call for an alternative to the U.S. dollar as the reserve currency of the world.

In particular, one UN report envisions “a new global reserve system” in which the U.S. no longer has dominance….

“A new global reserve system could be created, one that no longer relies on the United States dollar as the single major reserve currency.”

#9 The IMF Has Been Pushing For A New World Reserve Currency

The International Monetary Fund has also published a series of reports calling for the U.S. dollar to be replaced as the reserve currency of the world.

In particular, one IMF paper entitled “Reserve Accumulation and International Monetary Stability” that was published a while back actually proposed that a future global currency be named the “Bancor” and that a future global central bank could be put in charge of issuing it….

“A global currency, bancor, issued by a global central bank (see Supplement 1, section V) would be designed as a stable store of value that is not tied exclusively to the conditions of any particular economy. As trade and finance continue to grow rapidly and global integration increases, the importance of this broader perspective is expected to continue growing.”

#10 Most Of The Rest Of The World Hates The United States

Global sentiment toward the United States has dramatically shifted, and this should not be underestimated.

Decades ago, we were one of the most loved nations on earth.

Now we are one of the most hated.

If you doubt this, just do some international traveling.

Even in Europe (where we are supposed to have friends), Americans are treated like dirt.  Many American travelers have resorted to wearing Canadian pins so that they will not be treated like garbage while traveling over there.

If the rest of the world still loved us, they would probably be glad to continue using the U.S. dollar.  But because we are now so unpopular, that gives other nations even more incentive to dump the dollar in international trade.

So what will happen if the reign of the U.S. dollar as the world reserve currency comes to an end?

Well, some of the potential effects were described in a recent article by Michael Payne….

“The demise of the dollar will also bring radical changes to the American lifestyle. When this economic tsunami hits America, it will make the 2008 recession and its aftermath look like no more than a slight bump in the road. It will bring very undesirable changes to the American lifestyle through massive inflation, high interest rates on mortgages and cars, and substantial increases in the cost of food, clothing and gasoline; it will have a detrimental effect on every aspect of our lives.”

Most Americans don’t realize how low the price of gasoline in the United States is compared to much of the rest of the world.

There are areas in Europe where they pay about twice what we do for gasoline.  Yes, taxes have a lot to do with that, but the fact that the U.S. dollar is used for almost all oil transactions also plays a significant role.

Today, America consumes nearly a quarter of the world’s oil.  Our entire economy is based upon our ability to cheaply transport goods and services over vast distances.

So what happens if the price of gasoline doubles or triples from where it is at now?

In addition, if the reign of the U.S. dollar as global reserve currency ends, the U.S. government is going to have a much harder time financing its debt.

Right now, there is a huge demand for U.S. dollars and for U.S. government debt since countries around the world have to keep huge reserves of U.S. currency lying around for the sake of international trade.

But what if that all changed?

What if the appetite for U.S. dollars and U.S. debt dried up dramatically?

That is something to think about.

At the moment, the global financial system is centered on the United States.

But that will not always be the case.

The things talked about in this article will not happen overnight, but it is important to note that these changes are picking up steam.

Under the right conditions, a shift in momentum can become a landslide or an avalanche.

Clearly, the conditions are right for a significant move away from the U.S. dollar in international trade.

So when will this major shift occur?

Only time will tell.

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A Cashless Society May Be Closer Than Most People Would Ever Dare To Imagine

A Cashless Society May Be Closer Than Most People Would Ever Dare To Imagine

Most people think of a cashless society as something that is way off in the distant future.  Unfortunately, that is simply not the case.  The truth is that a cashless society is much closer than most people would ever dare to imagine.  To a large degree, the transition to a cashless society is being done voluntarily.  Today, only 7 percentof all transactions in the United States are done with cash, and most of those transactions involve very small amounts of money.  Just think about it for a moment.  Where do you still use cash these days?  If you buy a burger or if you purchase something at a flea market you will still use cash, but for any mid-size or large transaction the vast majority of people out there will use another form of payment.  Our financial system is dramatically changing, and cash is rapidly becoming a thing of the past.  We live in a digital world, and national governments and big banks are both encouraging the move away from paper currency and coins.  But what would a cashless society mean for our future?  Are there any dangers to such a system?

Those are very important questions, but most of the time both sides of the issue are not presented in a balanced way in the mainstream media.  Instead, most mainstream news articles tend to trash cash and talk about how wonderful digital currency is.

For example, a recent CBS News article declared that soon we may not need “that raggedy dollar bill” any longer and that the “greenback may soon be a goner”….

It’s what the wallet was invented for, to carry cash. After all, there was a time when we needed cash everywhere we went, from filling stations to pay phones. Even the tooth fairy dealt only in cash.

But money isn’t just physical anymore. It’s not only the pennies in your piggy bank, or that raggedy dollar bill.

Money is also digital – it’s zeros and ones stored in a computer, prompting some economists to predict the old-fashioned greenback may soon be a goner.

“There will be a time – I don’t know when, I can’t give you a date – when physical money is just going to cease to exist,” said economist Robert Reich.

So will we see a completely cashless society in the near future?

Of course not.  It would be wildly unpopular for the governments of the world to force such a system upon us all at once.

Instead, the big banks and the governments of the industrialized world are doing all they can to get us to voluntarily transition to such a system.  Once 98 or 99 percent of all transactions do not involve cash, eliminating the remaining 1 or 2 percent will only seem natural.

The big banks want a cashless society because it is much more profitable for them.

The big banks earn billions of dollars in fees from debit cards and they make absolutely enormous profits from credit cards.

But when people use cash the big banks do not earn anything.

So obviously the big banks and the big credit card companies are big cheerleaders for a cashless society.

Most governments around the world are eager to transition to a cashless society as well for the following reasons….

-Cash is expensive to print, inspect, move, store and guard.

-Counterfeiting is always going to be a problem as long as paper currency exists.

-Cash if favored by criminals because it does not leave a paper trail.  Eliminating cash would make it much more difficult for drug dealers, prostitutes and other criminals to do business.

-Most of all, a cashless society would give governments more control.  Governments would be able to track virtually all transactions and would also be able to monitor tax compliance much more closely.

When you understand the factors listed above, it becomes easier to understand why the use of cash is increasingly becoming demonized.  Governments around the world are increasingly viewing the use of cash in a negative light.  In fact, according to the U.S. government paying with cash in some circumstances is now considered to be “suspicious activity” that needs to be reported to the authorities.

This disdain of cash has also grown very strong in the financial community.  The following is from a recent Slate article….

David Birch, a director at Consult Hyperion, a firm specializing in electronic payments, says a shift to digital currency would cut out these hidden costs. In Birch’s ideal world, paying with cash would be viewed like drunk driving—something we do with decreasing frequency as more and more people understand the negative social consequences. “We’re trying to use industrial age money to support commerce in a post-industrial age. It just doesn’t work,” he says. “Sooner or later, the tectonic plates shift and then, very quickly, you’ll find yourself in this new environment where if you ask somebody to pay you in cash, you’ll just assume that they’re a prostitute or a Somali pirate.”

Do you see what is happening?

Simply using cash is enough to get you branded as a potential criminal these days.

Many people are going to be scared away from using cash simply because of the stigma that is becoming attached to it.

This is a trend that is not just happening in the United States.  In fact, many other countries are further down the road toward a cashless society than we are.

Up in Canada, they are looking for ways to even eliminate coins so that people can use alternate forms of payment for all of their transactions….

The Royal Canadian Mint is also looking to the future with the MintChip, a new product that could become a digital replacement for coins.

In Sweden, only about 3 percent of all transactions still involve cash.  The following comes from a recent Washington Post article….

In most Swedish cities, public buses don’t accept cash; tickets are prepaid or purchased with a cell phone text message. A small but growing number of businesses only take cards, and some bank offices — which make money on electronic transactions — have stopped handling cash altogether.

“There are towns where it isn’t at all possible anymore to enter a bank and use cash,” complains Curt Persson, chairman of Sweden’s National Pensioners’ Organization.

In Italy, all very large cash transactions have been banned.  Previously, the limit for using cash in a transaction had been reduced to the equivalent of just a few thousand dollars.  But back in December, Prime Minister Mario Monti proposed a new limit of approximately $1,300 for cash transactions.

And that is how many governments will transition to a cashless society.  They will set a ceiling and then they will keep lowering it and lowering it.

But is a cashless society really secure?

Of course not.

Bank accounts can be hacked into.  Credit cards and debit cards can be stolen.  Identity theft all over the world is absolutely soaring.

So companies all over the planet are working feverishly to make all of these cashless systems much more secure.

In the future, it is inevitable that national governments and big financial institutions will want to have all of us transition over to using biometric identity systems in order to combat crime in the financial system.

Many of these biometric identity systems are becoming quite advanced.

For example, just check out what IBM has been developing.  The following is from a recent IBM press release….

You will no longer need to create, track or remember multiple passwords for various log-ins. Imagine you will be able to walk up to an ATM machine to securely withdraw money by simply speaking your name or looking into a tiny sensor that can recognize the unique patterns in the retina of your eye. Or by doing the same, you can check your account balance on your mobile phone or tablet.

Each person has a unique biological identity and behind all that is data. Biometric data – facial definitions, retinal scans and voice files – will be composited through software to build your DNA unique online password.

Referred to as multi-factor biometrics, smarter systems will be able to use this information in real-time to make sure whenever someone is attempting to access your information, it matches your unique biometric profile and the attempt is authorized.

Are you ready for that?

It is coming.

In the future, if you do not surrender your biometric identity information, you may be locked out of the entire financial system.

Another method that can be used to make financial identification more secure is to use implantable RFID microchips.

Yes, there is a lot of resistance to this idea, but the fact is that the use of RFID chips in animals and in humans is rapidly spreading.

Some U.S. cities have already made it mandatory to implant microchips into all cats and all dogs so that they can be tracked.

All over the United States, employees are being required to carry badges that contain RFID chips, and in some instances employers are actually requiring employees to have RFID chips injected into their bodies.

Increasingly, RFID chips are being implanted in the upper arm of patients that have Alzheimer’s disease.  The idea is that this helps health care providers track Alzheimer’s patients that get lost.

In some countries, microchips are now actually being embedded into school uniforms to make sure that students don’t skip school.

Can you see where all of this is headed?

Some companies are even developing RFID technologies that do not require an injection.

One company called Somark has developed chipless RFID ink that is applied directly to the skin of an animal or a human.  These “RFID tattoos” are applied in about 10 seconds using micro-needles and a reusable applicator, and they can be read by an RFID reader from up to four feet away.

Would you get an “RFID tattoo” if the government or your bank asked you to?

Some people out there are actually quite excited about these new technologies.

For example, a columnist named Don Tennant wrote an article entitled “Chip Me – Please!” in which he expressed his unbridled enthusiasm for an implantable microchip which would contain all of his medical information….

“All I can say is I’d be the first person in line for an implant.”

But are there real dangers to going to a system that is entirely digital?

For example, what if a devastating EMP attack wiped out our electrical grid and most of our computers from coast to coast?

How would we continue to function?

Sadly, most people don’t think about things like that.

Our world is changing more rapidly than ever before, and we should be mindful of where these changes are taking us.

Just because our technology is advancing does not mean that our world is becoming a better place.

There are millions of Americans that want absolutely nothing to do with biometric identity systems or RFID implants.

But the mainstream media continues to declare that nothing can stop the changes that are coming.  A recent CBS News article made the following statement….

“Most agree a cashless society is not only inevitable, for most of us, it’s already here.”

Yes, a cashless society is coming.

Are you ready for it?