What De-Dollarization Means For Gold, Silver, & Commodities

June 1, 2024

What De-Dollarization Means For Gold, Silver, & Commodities

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hey everybody smart silverstacker here this week we saw in the news that saudi arabia is now considering selling oil to china in exchange for the chinese currency the wan and you might see this news and think well saudi arabia’s got oil and china’s got you on so what’s the big deal they can sell them oil however they want the problem is that the us has had an agreement with saudi arabia since the 1970s to only price their crude oil in dollars back in the 70s when the saudis agreed to these terms the other opec nations all followed suit and as such any nation wishing to purchase oil has to first convert their currency into u.s dollars creating a constant and considerable demand for dollars around the world and this is the backbone of what is known as the petrodollar system this system strengthens the dollar status as the world’s reserve currency and it gives the us significant power over the world economy this system is also in part responsible for our ability to run an increasingly large trade deficit which now exceeds one trillion dollars annually the constant demand for greenbacks abroad has allowed us to export vast quantities of fiat around the world and now a major player like saudi arabia openly considering accepting a currency other than the us dollar in exchange is a serious threat to the dollar’s international status but this trend towards dedolorization is not a new one this is something that nations such as russia china and iran have been considering and planning for many years and it’s something we’re going to be hearing a lot more about in the near future dedolorization has significant implications for the us economy as well as for gold silver and other commodities and that’s what we’re going to be talking about in this video so let’s get to it first off i do want to say a big thank you for tuning in to my video today if you enjoy watching and you get some value out of it please do give it a big thumbs up down below and while you’re at it why not subscribe to the channel so i recently finished reading ray dalio’s book principles for dealing with the changing world order why nations succeed and fail and it’s a great read and i’d highly recommend it so i’ll put a link down in the description for anyone who wants to pick up a copy one interesting fact that ray dalio brings up in that book is that since the year 1700 there have been roughly 750 currencies around the world and of those only 20 percent are still in existence and all of those have been significantly devalued at some point and the dollar is no exception it is subject to the same rules as any other currency and its reign as the world’s reserve currency will not continue indefinitely the dollar has been the world’s reserve currency since the 1944 bretton woods agreement put the world on a dollar standard under that agreement the u.s dollar was backed by gold pegged at 35 dollars an ounce that all changed in 1971 when richard nixon temporarily suspended the dollar’s convertibility into gold i have directed secretary connelly to suspend temporarily the convertibility of the dollar into gold or other reserve assets the thing is that temporary suspension was never lifted and the world has been on a totally fiat dollar standard ever since in the 51 years that have passed since that time gold has gone from 35 an ounce to almost two thousand dollars announced today zoltan pasar credit suisse’s global head of short-term interest rate strategy believes that we are now witnessing the birth of a new world monetary order this time centered around commodity-based currencies in the east that will weaken the current dollar-based system and contribute to inflationary forces in the west his theory is that due to the russian invasion of ukraine and the subsequent western sanctions on russia the world’s largest exporter of commodities the price of russian produced commodities will continue to fall and that china will step in to buy them at discount prices china observing how russia’s forex reserves have recently been frozen by western sanctions may even decide to liquidate some of its us treasury holdings in order to facilitate the purchase of these russian commodities while the west suffers commodity shortages recession and higher interest rates poststar details all of this in a document titled bretton woods 3 that was published on march 7th i’ll put a link for anyone who wants to check that out but to save you the time i’ll read you pastar’s conclusion from the end of the document do you see what i see do you see inflation in the west written all over this like i do this crisis is not like anything we have seen since president nixon took the us dollar off of gold in 1971 the end of the era of commodity-based money when this crisis and war is over the us dollar should be much weaker and on the flip side the renminbi much stronger backed by a basket of commodities from the bretton woods era backed by gold bullion to bretton woods 2 backed by inside money treasuries with unhedgeable confiscation risks to bretton woods 3 backed by outside money gold bullion and other commodities after this war is over money will never be the same again and bitcoin if it still exists then will probably benefit from all of this and a move towards a commodity-based currency in the east is really not that far-fetched in fact russia and china seem to have been preparing for this move for some time by accumulating large reserves of precious metals russia for example is the world’s fifth largest holder of gold with reserves estimated at 2 299 tons the united states still holds the largest gold reserves worldwide with a gold stockpile of 8134 tons however when you consider that u.s gdp is about 14 times higher than russia’s you realize that relative to the size of their economy russia actually holds significantly more gold than the us also china comes in sixth place with gold holdings of 1948 tons however china is the largest producer of minerals worldwide in this chart from statista you can see that in 2018 chinese mines produced 180 billion dollars worth of mineral resources compared to u.s production of roughly 93 billion combine this with the fact that russia is the largest exporter of petroleum in the world and you can see why russia and china are in a position where the creation of a commodity-backed currency could be possible and like i said russia and china have been planning this move for some time this is a document published by the congressional research service back in july of 2021 titled de-dollarization efforts in china and russia and this is a short two-page report i’ll link this down in the description as well for anyone who wants to give it a read but i’ll go ahead and read the first paragraph and it pretty much sums up the situation for more than a decade china and russia have sought to reduce their use of the u.s dollar or de-dollarize their economies in an effort to shield their economies from u.s sanctions reduce exposure to the effects of u.s economic and monetary policy and assert global economic leadership while china and russia have somewhat reduced their dollar use both countries as do most countries still rely heavily on the dollar china holds significant dollar reserves and does not allow its currency the renminbi or rmb to be traded freely in foreign exchange markets this limits the renminbi’s use in cross-border transactions and has constrained china’s broader dedolorization efforts russia’s ruble is not widely used abroad and global energy markets russia’s main exports are traditionally denominated in dollars over time however if dedolorization efforts gain traction there could be implications for the us economy u.s sanctions and u.s global economic leadership and of course a lot has changed since this document was published russia’s fear of the dollar being weaponized against it has been proven correct and certainly china must be concerned that they could be next it’s no secret that china has ambitions of invading taiwan and subjecting it to the control of the chinese communist party and anything they can do to reduce the ability of the united states to fight back economically is in their best interest and it’s not just china the current conflict in ukraine and the subsequent u.s sanctions have likely given other nations cause to reflect on their own dependence on the u.s dollar and saudi arabia considering selling oil priced in yuan is just one example india the world’s second most populous nation and the largest democracy recently notably abstained from a u.n vote to condemn the russian invasion of ukraine india has also declined to join in the sanctions against russia from whom they import over 60 of their military equipment as a result of the western sanctions on russia india has begun to import significantly more crude oil from russia and is now obtaining it at a significant discount not only that but it is now reported that india is even considering using the yuan as a reference currency for these imports instead of the dollar and the list goes on if you search for dedolorization you’ll find many news stories of nations around the world beginning to consider alternatives to the dollar and trying to find ways to insulate themselves from the monetary weaponization that is currently being aimed at russia so what does all of this mean for gold silver and other commodities well the effects of dedolorization will likely be widespread and numerous however one likely outcome is a significant reduction in the purchasing power of the dollar and this means that at least in dollar terms the price of gold and silver will likely be moving much higher as such it seems that it would be wise for individuals to follow suit with foreign nations in divesting themselves of at least some dollar denominated assets and diversifying into hard money assets like gold and silver bullion of course none of this is financial or investment advice i’m not a financial advisor i’m just sharing with you my thoughts on this rapidly developing phenomenon of dedolorization and how i am personally getting prepared should this trend continue and one last thing speaking of commodity shortages and hikes in the price of gold and silver this is a press release from the u.s mint dated march 14th titled united states mint announces pause in production and sales of morgan and peace dollars for 2022 popular historic program will return in 2023 in 2021 the mint began making reproductions of the famous morgan and peace silver dollars but now it looks like that’s on hold and this is what the mint had to say in the press release the united states mint today announced it will forego the production and sales of morgan and peace silver dollars in 2022 this calculated pause is directly related to the global pandemic’s impact upon the availability of silver blanks from the mint suppliers the suspension will give the mint time to evaluate the best way to allocate our limited supply of silver to ensure the best customer experience we can so there you have it folks straight from the us mint there is a limited supply and shortage of silver is that shortage the result of the pandemic as the mint claims maybe or it could be that the suppression and manipulation of the silver price using paper futures markets has led to the predictable outcome of a shortage of the physical underlying commodity and if you don’t understand why suppressing the price of a commodity leads to a shortage then check out the video i made titled silver price manipulation stack more physical silver bullion because i cover that topic in depth in that video and if you’ve got some thoughts on dedolorization commodity shortage or the loss of the dollar status as the world’s reserve currency then please share them in the comments down below and if you enjoyed this presentation and would like to see more videos about gold silver and the economy then check out the videos that are popping up on your screen right now thank you all very much for watching stay safe and happy stacking i’ll catch you next time smart silver stacker out [Music] you

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