Economic effects of the fall of the dollar A weaker dollar buys fewer foreign goods. This increases the price of imports and contributes to inflation. As the dollar weakens, investors in the 10-year benchmark Treasury and other bonds sell their dollar-denominated shares. To protect their investments, many investors are turning to gold as a safe haven asset.
One way to do this is to start a Gold IRA, which allows you to invest in gold while taking advantage of the tax benefits of a retirement account. Currency collapses are due to a lack of faith in the stability or usefulness of money, either as a way of storing value or as a medium of exchange. Dark clouds are coming for the world's dominant currency. Despite some positive financial news in the United States, nations are reducing their dependence on the U.S. UU.
Instead, they are filling their vaults with gold, euros, yuan and other currencies. And Russia is far from the only nation moving away from the dollar. Kazakhstan and Turkey halved their dollar reserves last year and accumulated 51 tons of gold ingots each. China sold 5 percent of its reserves in dollars and bought 10 tons of gold.
Ireland got rid of 14 percent of its dollar reserves, Switzerland got rid of 6 percent of its dollar reserves and Japan got rid of 2 percent of its dollar reserves. In total, about 60 countries reduced their central banks' dollar holds last year, while more than two dozen countries increased their gold reserves. The government has spent this way for decades, and nations continue to lend it all the money they want at historically low interest rates. Why? Banks continue to lend money to the United States because the dollar is the world's dominant reserve currency.
Nearly 45 percent of the world's debt is denominated in dollars, and about 52 percent of international trade is conducted in dollars. Since banks around the world need a large amount of dollars to conduct business, nearly 62 percent of foreign exchange reserves are held in dollars. High demand for dollars keeps the interest rate on US debt low. Because a lot of people want to have dollars, they want to buy dollars.
Debt in the form of an EE. Treasury bonds are an easy way to do that. And since a lot of people want to buy these bonds, the U.S. government can sell them at incredibly low interest rates.
But as nations lose faith in the United States,. The financial system and the sale of its reserves in dollars, the situation is changing. The dollar loses its status as a reserve currency. Its value is falling and the interest rate that banks charge the United States for loans is rising.
The only reason the dollar hasn't plummeted is because the world's other major currencies are in an even worse situation than the dollar. Since there is currently no viable alternative reserve currency, banks continue to use the dollar reluctantly despite its flaws. Millennia ago, the Bible predicted that the United States,. It would be plagued by debts at the end of time and clearly indicates that the dollar will lose its status as a reserve currency at the hands of a European superpower.
The dollar was not always a reserve currency. Before World War I, the British pound sterling was the dominant currency and the dollar was barely used outside the borders of the United States. But the Federal Reserve Act of 1913 centralized the U.S. The banking system, as nations around the world began to abandon the gold standard in order to pay for their military expenses with borrowed paper money.
Then, the United States became the lender of choice when nations bought the U.S. Bonds denominated in Federal Reserve notes. . The dollar's position as the world's dominant reserve currency strengthened during the Second World War.
At the end of the war, the United States,. It held the majority of the world's gold reserves. Since no other country could establish a gold-backed currency, the world's largest economies set the exchange rate of their currencies to the dollar. In 1944, at a conference in Bretton Woods, New Hampshire, the United States promised that any dollar could be exchanged for its value in gold.
So the dollar became the new gold standard. During the 1950s, more than 90 percent of the world's debt was denominated in dollars. So they started demanding gold for the dollars they had in reserve. Instead of seeing American gold reserves run out, President Richard Nixon abandoned what was left of the gold standard.
To ensure that the dollar remained the dominant reserve currency in the world, he negotiated an agreement with the Saudis. He promised to arm and protect Saudi Arabia if Saudi royalty denominated all future oil sales in dollars. The Saudis agreed and the dollar became an oil-backed currency. The fact that the Organization of Petroleum Exporting Countries uses dollars in all its oil transactions creates massive demand from the U.S.
It is partly due to this demand that the average interest rate on a 10-year loan to the U.S. The government fell from 7.56 percent in 1974 to 2.69 percent today. Since nations need dollars to buy oil and other goods, they buy dollars in the form of U.S. dollars, U.S.
Treasury Bonds (which are like a US promissory note). You can continue to accumulate debts by selling promissory notes around the world without having to worry too much about the costs of servicing your growing debt. The former French Finance Minister, Valéry Giscard d'Estaing, called the ability of the United States to borrow at low interest due to the dollar's reserve currency status as an “exorbitant privilege.”. This privilege is based on high demand from the U.S.
When the dollar is no longer in international demand, the U.S. You will lose your ability to borrow money cheaply, and interest payments on the national debt will consume an increasing portion of the gross domestic product of the United States. The same pressures that overthrew the French franc in the 19th century and the British pound in the 20th century will overthrow the dollar in the 21st century. What made national banks stop using the pound sterling for their transactions in 1919? It was mainly Britain's debt.
Governments analyzed how much Britain owed, its economic production and the fact that its currency was not backed by gold but by the belief that it was valuable, and they stopped believing. Today, the United States has much worse debt and continues to borrow. Nations are losing faith in the stability of the dollar; they simply have no other choice yet. Many European leaders want the euro to replace the dollar as the world's dominant reserve currency, but concerns that the EU could crumble have prevented central banks from embracing the euro wholeheartedly.
Similarly, many Chinese government officials want the yuan to replace the dollar as the world's reserve currency, but China's lack of monetary transparency has been a stumbling block. However, the status quo is ready to change if the eurozone truly merges into a superstate led by Germany or if China relaxes the link between the yuan and the dollar. Many nations and individuals desperately want these changes. But if history is any guide, it will take a shock for the global financial system to collapse.
The shock that catapulted the dollar to the status of the dominant reserve currency between 1913 and 1919 was a banking crisis in Europe that led central banks to bet on the U.S. currency. Ironically, it may be a banking crisis in the United States that leads central banks to bet on the European currency. Armstrong predicted that a financial crisis in the United States would likely be a catalyst that would push Europe to unite.
In particular, he warned in 1984 that a massive banking crisis in the United States “could suddenly cause European nations to unite as a new world power larger than the Soviet Union or the United States,. In other words, a banking crisis could scare European nations into ceding control to a central authority. Once the euro has the support of a central government strong enough to regulate the fiscal and spending policies of its member states, the day of the dollar as the dominant reserve currency will be over. The greenback will be coincident with the euro, at best, and an isolated North American currency at worst.
This alarming forecast isn't just based on current financial conditions. It is also based on biblical prophecy. In his historic book The United States and Great Britain in Prophecy, Mr. Armstrong explained that the Anglo-Saxon peoples who settled in Britain and the United States are actually descendants of the ancient Israelites.
This amazing truth means that all of the Bible's end-time prophecies about Israel are primarily aimed at the United States and Great Britain. A series of prophecies in Deuteronomy reveal the specific curses that will befall end-time Israel once it departs from God's law. Everything indicates that a global financial crisis is about to engulf the United States. From its current dizzying heights, it allows Europe and its allies to usurp its economic dominance.
If a massive financial crisis centered on the United States is the catalyst that triggers the rise of the seventh and final resurrection of the Holy Roman Empire, as Mr. Armstrong predicted that the world would face another change in reserve currencies. And with modern technology, it will be even faster than last time. When investors start selling dollars and rush to invest in other currencies, the demand for U.S.
Treasury bonds will plummet and interest rates will rise. You're already spending 11 percent of your total tax revenue just to pay interest on your debt. However, if interest rates returned to the level they were just four decades ago, during the recession of 1981-82, the United States would have to spend 44 percent of its tax revenues on interest. It would cost him to finance both an army and a mass welfare state.
Similar conditions are looming in the United States after the dollar is dethroned and the nation is economically besieged. And even if the United States were to renegotiate or stop paying some debt obligations, there is little evidence that the world would allow the dollar to collapse and run the risk of possible contagion. Not surprisingly, the Zimbabwean government opposed the use of the dollar, as it wanted to maintain control of the economy and the people. Thanks to its status as a reserve currency, the dollar receives additional legitimacy in the eyes of domestic users, foreign exchange traders and participants in international transactions.
The government tried hard to pay its interest, foreign creditors could get rid of the dollar and cause a collapse. After a fall, the greater the link with the US dollar, the greater the loss of economic freedom, although, in most of these countries, the government is likely to be less efficient than in the United States, which would favor the individual. Therefore, unless the EU has already established a new euro in advance, it is quite possible that the US dollar will be chosen as an immediate solution to the problem, since the US dollar is currently recognized and traded throughout Europe. .
