by Money Metals
October 31, 2024
from MoneyMetals Website







In the latest Money Metals Midweek Memo podcast below, host Mike Maharrey analyzed recent developments in global currency and trade dynamics, particularly as they relate to BRICS countries' increasing moves toward de-dollarization.

From symbolic events to hard-hitting economic discussions, Maharrey covered the potential implications for the U.S. dollar as the world's reserve currency and examined how central banks are preparing for these shifts.

 

 


 

 


Treasury Secretary Yellen's Symbolic Moment

The above podcast opened with a moment Maharrey found rich in symbolism:

during a press briefing, the U.S. Treasury Department seal fell from the podium as Secretary Janet Yellen answered questions about the dollar's future as the global reserve currency.

This seemingly minor incident underscored the growing sentiment that the dollar's stability may be increasingly precarious.

 

 

 


BRICS Expands - Dollarization and De-dollarization
 



 


The BRICS nations - Brazil, Russia, India, China, and South Africa - recently held a summit in Kazan, Russia, where the conversation centered on,

potential alternatives to the dollar...

The alliance expanded on January 1, 2024, to include Egypt, the UAE, Iran, and Ethiopia, with Turkey, Azerbaijan, and Malaysia also applying for membership.

Despite these expansions and talks of creating an independent payment system, Maharrey noted that true de-dollarization among BRICS remains challenging, with China, India, and others still deeply reliant on the global dollar system.

 

 

 


Russia's Push for an Independent System

As one of the most vocal proponents of dollar alternatives, Russia has been advocating for a BRICS payment system that would circumvent the SWIFT network, which it was locked out of following the Ukraine "invasion"...

The summit discussions included "BRICS Clear",

an initiative for an independent cross-border settlement system,

...but Maharrey emphasized that creating such a system is far from straightforward.

 

 

 


The Dollar's Declining Role in Global Reserves

 

Citing a South China Morning Post article, Maharrey explained that the U.S.'s weaponization of the dollar through sanctions has motivated many countries to explore alternatives.

 

For example:

  • China's Cross-Border Payment System (CIPS):

    Operating since 2015, CIPS is an alternative to SWIFT, used by 135 countries, primarily those in China's Belt and Road Initiative.
     

  • Bilateral Agreements:

    Nations like China, Brazil, India, and the UAE are settling trade in their own currencies, avoiding the dollar entirely.

 



Central Banks' Growing Gold Reserves

Global central banks are increasingly stocking gold to hedge against dollar volatility.

 

As of mid-2024, central banks had added 483 tons of gold to their reserves, surpassing 2023's record.

 

This trend is fueled by concerns over dollar-based sanctions, inflation risks, and the need for a stable reserve that isn't subject to foreign policy leverage.

 

 

 


Erosion of Dollar Dominance
 



 


According to the Atlantic Council, the dollar's share of global reserves has declined from 72% in 2002 to approximately 58% today, a trend that highlights the gradual erosion of the dollar's global dominance.

 

Factors driving this shift include:

  • Bilateral Trade Deals:

    China and Brazil announced a dollar-free trade deal in 2024, and India and the UAE settled an oil deal without the dollar.
     

  • Central Banks Diversifying Reserves:

    With fewer dollars held in global reserves, countries are increasingly adding alternative assets like gold.

 



Implications for U.S. Consumers and Economy

The reduction in global dollar demand could significantly impact U.S. inflation, federal borrowing, and government spending.

 

A decline in dollar demand would reduce demand for U.S. Treasury debt, leading to higher interest rates and increased federal interest payments.

 

The U.S. fiscal year 2024 saw interest expenses surpass $1 trillion, outpacing defense and Medicare budgets.
 

 

 

 

Preparing for De-dollarization with Precious Metals

Maharrey urged listeners to consider gold and silver as hedges against a devaluing dollar.

 

He emphasized that these precious metals serve as "real money" that holds intrinsic value regardless of the currency landscape.

To conclude, Maharrey reiterated:

the importance of sound money and staying informed on shifts in global financial systems, encouraging listeners to explore their options in precious metals through Money Metals Exchange.

 

 

 

Video