The Controlled Demolition of the US Dollar’s Reserve Status [Podcast]

Even during the darkest moments of the Biden administration—the shameful withdrawal from Afghanistan, 9% inflation, bureaucrats hell-bent on destroying the economy—I still said America’s problems were fixable. But I didn’t see any hope in the previous administration or a prospective Kamala administration to fix things and only expected them to grow worse. We’re now a month and a half into a new administration, and it’s fair to say some things are going very well. There are others that, depending on your view, are not. One big concern I have is that no one is interested in reforming Social Security—a massive entitlement program whose own trustees say will run out of money over the next several years. This is a gargantuan financial crisis in the making, a ticking time bomb that no one wants to touch. Depending on your priorities, foreign relations are also on the list of concerns. If you're more isolationist, you might think that the unwinding of relationships and alliances is no big deal—that the world needs America more than America needs the world. But there are consequences to that... $28 trillion of US government debt is coming due over the next four years, and a lot of that is owned by foreign governments and central banks. The Treasury Department needs these players to go along and reinvest—not only in America but specifically in US government bonds. And if relationships are too fractured, they might not be willing to do that. That could create an enormous fiscal crisis that would most likely result in a lot of inflation. It also puts into question the US dollar’s status as the global reserve currency, which it has enjoyed for more than 80 years. The reality, however, is that while the short-term consequences of losing reserve status could be profound, in the long term, reserve currency status is not a requirement for economic prosperity. There are plenty of countries around the world—Taiwan, Singapore, Switzerland, etc.—that are prosperous nations and do not have the global reserve currency. In some respects, reserve status is a huge benefit, but also a bit of a handcuff. In today’s podcast episode, we explore what we call the “controlled demolition” of America’s reserve status—a way for America to potentially remain powerful yet lose that reserve status. That could be the outcome over the next four years. And today, we discuss the paths and consequences of that scenario. Spoiler Alert: It’s probably good for gold, and possibly crypto too. https://youtu.be/64rBPmknUZQ (You can access this video's transcript here.)