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 Replies: 47 / Views: 4,456 |
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Valued Member
United States
311 Posts |
"after the USD is no longer the reserve currency".
If you could suggest what other currency would serve as the world reserve (without laughing), then we could contemplate a non-USD future. Until then, USD it is.
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Valued Member
United States
136 Posts |
That's a good question but in fact there doesn't have to be a specific reserve currency. Even if the USD is A reserve currency amongst say CHF, EUR, and even maybe something like the BRICS currencies if they come up with their gold backed deliverable, will still significantly devalue the USD.
But we are as far as trends go transitioning from a unipolar to a multipolar world and that will have consequences.
The BRICS countries are mostly trying to decouple from the US. There are some like Argentina that have seen the light and didn't enter into the BRICS system but these could be a very significant power block especially if China finally realizes that it needs to make CNY deliverable to have a shot at reserve status.
The EU is also pushing very hard to make EUR a reserve currency at least and whilst CHF is probably too small to become a reserve currency it is behaving much more like a reserve currency than the USD in terms of appreciating when the stock market weakens and vice versa.
gold and silver backing currencies are still a possibility - we are not that far away from the old bretton woods systems even though it might seem to be the case - its only just over half a century that the system was still there.
And finally, if the entire world goes to CBDC, there really won't be any reserve currencies due to the fact that there would no longer be a de facto deliverable currency regardless of claims otherwise. That could come sooner than people think (within a decade) as the systems are already there for this to happen.
So we need to be careful. I won't mention politics as this is not appropriate but the USD could easily have reduced reserve status or even none at in the the space of a 10 year period from now.
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Valued Member
United States
311 Posts |
"when FDR basically unilaterally defaulted by calling in all gold coins bullions "
With the benefit of hindsight, this was probably the most consequential and far reaching decision in the history of the USA. Here we are now, the world's largest and richest economy, with the biggest pile of gold by far, and we are the reserve currency for the world which is unlikely to ever be challenged.
By definition, the reserve currency has to be the country with the largest economy. How in the world could CHF be the reserve currency? The only likely challenger would be the EU. You can hide a lot of sins behind your reserve currency but you don't hear much clamor from the EU anymore. They have their hands full. Greece is barely stable. And you have Italy, Portugal and Spain on the edge of a cliff. I'm sure they'd welcome a very thorough financial colonoscopy.
There are no gold backed currencies and there never will be. Which country has the resources to open a gold window like the one FDR closed and defend it 24/7? That some day gold will just skyrocket overnight to $10m to reflect all the USD in circulation is just a fever dream.
Do you really think the world's reserve currency will ever rely on China or Russia or Egypt or Iran or Brazil?
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Bedrock of the Community
United States
94367 Posts |
If the US government defaulted, you'd have a lot more to worry about than the price of silver and gold.
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Moderator
 United States
34397 Posts |
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I won't mention politics as this is not appropriate Not at CCF. Thank you all for aiming clear of this subject.  "If you climb a good tree, you get a push."
-----Ghanaian proverb
"The danger we all now face is distinguishing between what is authentic and what is performed."
-----King Adz
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Pillar of the Community
 United States
6473 Posts |
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If the US government defaulted, you'd have a lot more to worry about than the price of silver and gold. That's the truth. If the entire system implodes, then the metal to own isn't gold, it's lead. Maybe if you keep your gold in an offshore bank account it would work. |
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Valued Member
United States
136 Posts |
@glenmorenee and that's just the point there doesn't have to be a reserve currency we are moving from a unipolar world economically to a multipolar world economically and politically.
As for your assertion that the largest economy is always the one which is the reserve currency that just isn't true at all.
For example the UK even including the entire British empire had a smaller total GDP than the US by the end of WWI but even in the mid 50s GBP was still 55% of world total reserves even though Bretton Woods was already set up and the remains of the British Empire was not even close to the US. Great Britain at that time had barely 15% of the GDP of the US....
And yes the entire world will probably never rely on China but a huge chunk of it probably will at some point unless they completely go full scale CCP (which is still certainly possible) and ruin all their progress.
As for being fully back on the gold standard yeah probably not though not because its impossible, but because CBDC will happen and that will end any currency being the reserve currency because CBDC basically makes any currency non-deliverable no different from the RUB or the CNY or any other and that is the big big issue.
And I agree wtih coinfrog - if the US defaults in some meaningful way there will be much bigger problems than the price of precious.
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Valued Member
United States
311 Posts |
Great Britain's experience further confirms what happens with reserve currencies. I would guess at some point they had a huge empire and economy to match. But not one but 2 devastating wars so crippled it (and I think WW2 was where we got a good chunk of their gold) and at the same time there was the emerging USA and the rest is history.
For the same to happen to the US, you'd have to bet on a cratered economy and some other country (that everybody pretty much trusts) somehow surging ahead while it's largest trading partner disappears. Who would this be?
I don't see how CBDC happens. If a lot of countries hate USD, how are you going to get them to accept something as esoteric as digital currencies?
Actually you've changed my mind now. If USA tries CBDC, it will be the end of USD reserve currency. The rest of the world will conduct business in yen, eur and yuan.
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Bedrock of the Community
United States
10982 Posts |
We're good to go for another quarter century. Somewhere around 2050 hard decisions will have to be made. Hard decisions that have been put off for the last half century. I believe we can milk the cow for about 25 years before a major reset.
Edited by BH1964
04/30/2024 04:22 am
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Pillar of the Community
United States
3343 Posts |
So far all governments have soldiered on by debasing their fiat currencies. Some countries (Venezuela and Zimbabwe, eg) do far worse than others. Currency inflation is a continuous semi-managed default.
Back in the 1990's I sold four $10 Eagles and bought a Breitling watch for $800. Today I could buy the same watch for $4000 by selling four $10 Eagles. Since the end of Bretton Woods in the early 1970's, $40 worth of gold Eagles are now valued at $4000 - yet 50 years later the watch is still worth four gold Eagles. That's what I'm calling a continuous default.
It doesn't inspire me to save Federal Reserve notes under my mattress for a rainy day. I know from experience that it will take four gold Eagles to replace that watch when it wears out.
"Two minutes ago I would have sold my chances for a tired dime." Fred Astaire
Edited by thq
04/30/2024 09:31 am
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Pillar of the Community
United States
6473 Posts |
Having reached a consensus on the whole thing not collapsing, we might want to consider a symbolic default. After all, these are the same knuckleheads who have repeatedly made symbolic government shutdowns. Markets are based partly on confidence, and if they enact the wrong grandstanding at the wrong time, it could send massive shockwaves through the world financial system.
The thing that I always have in the back of my mind is that when the situation became dire, the U.S. government already outlawed personal ownership of precious metals, and the populace accepted it. In a future crisis, if they said that all good and silver was needed for national stability, I think people would support that again. Most don't stack silver and gold, so it's no skin off their back to endorse a policy that doesn't directly affect them.
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Valued Member
Canada
128 Posts |
In Canada the government has made a "back in law" whereby if the banks get in trouble they can confiscate people's deposits and turn them into shares .They can do this to stay afloat . I am aware of what happened in 1933 in the US but I don't think enough people own gold to help any GOVT . Personnel ownership is around 2.5 % if I have heard correctly. I think that they would be looking at bank deposits and not gold in the next crisis . Just my opinion of what is possible in Canada.
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Pillar of the Community
United States
6473 Posts |
In a crisis, many of the actions taken are symbolic. Metals would be a good target because relatively few people own them, and confiscation would prevent them from becoming a haven during a banking emergency. You want all money in the bank at that point. In the U.S., ownership of physical cash has been effectively outlawed for a similar reason.
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Valued Member
United States
416 Posts |
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Back in the 1990's I sold four $10 Eagles and bought a Breitling watch for $800. Today I could buy the same watch for $4000 by selling four $10 Eagles. Since the end of Bretton Woods in the early 1970's, $40 worth of gold Eagles are now valued at $4000 - yet 50 years later the watch is still worth four gold Eagles. That's what I'm calling a continuous default. This is a great personal example. The one I read is that in ancient Rome one ounce of gold (roughly) could buy a fine men's suit. Nowadays, gold at 2K .. yeah, roughly one fine men's suit. Gold doesn't change, the currencies sure do though. |
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Pillar of the Community
United States
6473 Posts |
But think about what would have happened if you had bought an ounce of gold worth of the S&P500 in Ancient Rome!   |
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Posted 04/28/2024 1:49 pm
