Financial Education #4: What Is A Reserve Currency?

Dollar Crisis to Golden Opportunity

Us dollar is about 60% of the value of all the currency in the planet. Roughly half of global countries have reserves in the US dollar because it acts as a reserve currency. This was due to the Bretton Woods meeting in 1944. A collection of countries from all around the world joined together to introduce a new monetary system after the Second World War. The agreement was that all countries would peg their currencies to the dollar and the dollar would peg themselves to gold, giving stable exchange rates. Plus, global oil is price in dollars, so in order to buy or sell oil you need the US dollar.

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Many countries nowadays want to trade without using the US dollar therefore they are setting up trade agreements. This is because the US dollar is not pegged to the $35 per ounce ratio that was agreed at Bretton Woods. The US have continued to print their currency and do not have the gold to hold the ratio for the new currency supply. Countries such as Iran that have tried to bypass the use of the dollar for international trade have been banned from using SWIFT, a global payments system run by the US dollar. The use of alternative currencies for trade has triggered war from the Americans historically. Iran, China, Libya have all tried to bypass the US dollar an do trade amongst themselves, yet where has America gone to ‘war’ in recent years?

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Countries are really starting to sense that the US Dollar is no longer a stable money and suitable reserve asset. America have gone way past the previously promised peg of $35 per ounce so countries are moving into gold and away from the dollar. Here are some examples of them doing that:

  • Iraq sell their oil in Euros
  • Iran end oil sales in dollars. They are taking commodities and gold.
  • China and Russia Bypass the dollar to do bilateral trade agreements. They hold eachothers currencies and trade that way.
  • China and Iran trade directly without the dollar and SWIFT. Japan too.
  • India and Japan trade directly.
  • Russia and India trade directly.
  • China and Brazil trade directly.
  • In Zambia you can go to jail if you use US dollars.
  • Netherlands, Germany, Venezuala, Ecuador and Austria demand a repatriation of their gold stored in America for dollars in return.
  • China sells US Treasury Bonds.

It’s clear to see that there is a huge loss in confidence of the US dollar, therefore countries are moving into other mediums of exchange. For retailers, people such as you and me, there is an opportunity to beat others to punch and the inevitable collapse. If the global countries and central banks are losing faith in the US dollar, perhaps so should we?

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Financial education is really important, especially right now. COVID is happening and there are significant health and social reciprocations. Yet it is important to understand the financial implications too and what is going on behind the scenes. Please continue to read my blogs about financial education and crypto as they come out. This is aimed to educate people who know nothing about these topics with the aim of having some protection when an inevitable financial collapse happens.

Currently, if you are new to this, you are not too late. The talk in crpyto is that if you aren't already in you are too late. This is not true. This is not true for gold or silver either. There is still an opportunity to educate yourself and make appropriate decisions for yourself!

Please upvote, reblog, and comment! I look forward to your thoughts on these topics too as I want to get this discussion going! Thank you.


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9 comments
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I wish more countries adopt decentralized crypto. This is at least a good option for smaller countries with less trade going on.

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Embracing borderless currencies would do a huge amount of good for those who do so!

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Exactly! We are living in a globalized world. We need global currencies that's not controlled by any party or UN.

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Exactly, the internet is borderless and trade is borderless. It would make sense to have borderless currencies. Yes we do at the moment (US Dollar) but SWIFT and other remitency mechanisms are veyr slow and outdated!

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Let's not forget SWIFT isn't free from censorship. It's also super expensive!

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Very true. And it's very slow! Regardless of the fact that the 'powers that be' need it around it's still not a superior technology to crypto !

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That's why I think (hopefully) it'll eventually fail and fade out of people's lives.

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