Will Gold And Silver Replace The Dollar After The Economic Collapse?
The dollar based system had dominated the global trade for decades but with the current economic condition and the instability in the global financial system, questions are arising on whether the dollar will support this very changing monetary system. Many people feel insecure with the current system and in this video, we will look at some of the reasons why the dollar will collapse and a gold based system will take over the global trade and the whole monetary system. Before diving into this, lets first understand what is the collapse of the dollar means.
The collapse of the dollar will happen if the value of the US dollar plummets and those who will be holding dollar-based assets will have to sell them at a very low price. This includes foreign government and investors who own the U.S treasuries. Such a crash can happen if everyone is simultaneously selling dollar based assets and when no one is willing to buy, the price will fall further causing the whole market to panic. If such a crash occurs, the world will shift to assets that are dominated by anything else other than the dollar. Most likely, gold and silver will be the best alternative and this will usher in a new payment system that will be based on gold. This might not happen any time soon but based on the current trend, at one moment it will have to take place.
When it comes to gold and silver, most of us always think of them as a form of mere forms of investment. This is one of the best investment vehicles especially those who want to minimize volatility in their portfolio. This is because gold and silver are very stable and their prices will always remain high as they have remained valuable in the entire human civilization. Gold is also recession proof and even in an economic depression, it will still retain its value and this makes it the best hedge against inflation or a recession. Many people have forgotten that that these are very rare metals that can be used as a way of storing wealth or even as a means of trade. No wonder some investors call gold “god’s money” because even in the worst economic collapse, gold and silver will still retain a big percentage of their value. The price of gold and silver is going higher every single year as more investors and central banks continue buying these precious metals. In case a total economic collapse happens, theses precious metals will be the safe heavens.
In many countries, silver and gold are still important parts of the monetary system. Sometimes back between 1870 and 1960s, silver was demonetized and at this period, a significant amount of silver coins and bars was melted and sold. This brought us to the current situation where we have a very small portion of silver in our monetary system. However, the masses have continued to hold silver as a key form of investment. For many years, silver and gold were used as a means of facilitating transactions before the modern money based monetary system was established. Since the current system is very undependable, an economic collapse will bring people back to the gold and silver based systems.
The current system is heavily reliant on debt and most people are losing confidence are they are beginning to stack silver and gold as they would buy bonds, stocks and other frontier investment assets. This is a way of protecting themselves from the economic crisis that is bound to happen any time because all signs are indicating that a major economic meltdown is on our way.
For several decades, the United States has faced a high level of inflation beginning from the 1970s when the Breton Wood system collapsed. Initially, based on the Breton wood agreement, the dollar was backed by gold and the value of the dollar was directly linked to the value of the gold. New dollar notes were printed in direct associated with the amount of newly mined gold. This ensured that gold remained stable and retained it value. At the height of the Vietnam War, the US printed more dollars beyond the increase in amount of newly mined gold and since then, the dollar has lost about 561 percent of its value. Since the dollar was taken out of the gold standard, the US dollar has been steadily losing its value. Because of this, the dollar is not dependable because it is losing it value very fast and it will not take long before people shift to gold.
From when President Nixon withdrew the dollar form the gold standard, the dollar has lost about 90% of its purchasing power. Because of this, the dollar has a lot of controversy especially considering the fact that we do not have an elaborate procedure that regulates the amount of dollars being printed every year. For example in the 2008 financial crisis, the Federal Reserve printed money to bail out banks and institutions that were at the verge of being declared bankrupt. Excessive printing of money over the years by the US Federal Reserve has further made the dollar lose it value and it will not be long before this reduces the dollar value with a significant percentage. The world has already lost trust with the dollar and everyone is looking for an alternative and soon we will have it.
The central banks and big financial institutions have already realized that the dollar is very unreliable and they have begun holding their reserves in form of gold instead of holding dollar reserves. The central banks seem to be in a gold buying spree and in the past decade, we have seen some banks double and even quadruple their amount of gold in reserve. Throughout the history of mankind, about 190,000 tons of gold have been mined and a big chunk of gold has already been bought by the banks. About 30,000 tones are held by various banks and this amount is increasing every year. The US leads in this list with over 8,000 tones in holdings. Recently we have seen Chinese and European banks also buying a lot of gold.
For many years, the central banks and other financial institutions have been silent about gold. “Silent is golden” is what can be said about this issue because banks have been secretly buying and holding large amounts of gold. It is only sometime back when the silence regarding gold was broken when one of the leading central banks gave their opinion on this matter. The Dutch central bank had a report that stated; “if the entire system collapses, the gold stock provides collateral to start over. Gold gives confidence in the power of the central bank’s balance sheet. That gives a safe feeling.” The Dutch central bank owns about 612.5 metric tons of gold and it is one of the top ten holders of gold worldwide. The reason why the central banks are accumulating tons of gold can only tells us about what might happen in the near future. They are also not confident with the current system and this is why they are holding gold in case the worse hits the current dollar based monetary system.
In the last 50 years, the dollar has lost more than 500 percent of its value relative to the gold and if this trend continues at the same rate, in the next 50 years the dollar will be worth almost nothing. If no steps are taken to stabilize the dollar, it will not be a surprise if at one point we wake up only to find that the whole world has fully dumped the dollar and has turned to gold as a way of facilitating global trade.
For many years, the United States has been overspending and this has made US a debtor nation. Today we have the highest debt levels in the US history. Federal debt, corporate debt, student loans and mortgage loans are some of the big debts that the US has today. For example, the student loan has already hit about $1.2 trillion while the government budget has a deficit of $2 trillion in budget deficit. On the other hand, the housing market also has a big pile of debt. This has made the United States a debt fueled economy and at one point, the whole bubble will burst. History has taught us that debtor nations don’t last forever and at one point, the US economy to will collapse in a big way. When a country collapses, their currency becomes worthless. After the dollar collapse, gold will be the default currency for international trade. This is the reason why so many people are trading the dollar for gold and silver.
Usually, when the cow excrement hits the rotating blades, by default you will hold on to the value you have created in the past and you will want the best form of money available. Since gold has always preserved it value throughout the human civilization, people will have to adopt gold because it is the only way to safeguard ourselves against the imminent dollar collapse.
The whole world knows that the United States is heading deeper into debt and this is not good for the world biggest economy. On the other hand, China and Russian have been digging themselves out of debt and they are slowly headed to be major economic powers. They have been accumulating a lot of gold and this is putting their currencies at a superior position compared to the US dollar. They have also been forming remarkable trading alliances with other countries as a way of creating a new system that is independent of the dollar. China already have their own gold and petro-dollar trading contracts while Russia is still refining its financial infrastructure. Also remember that we have the European Union that is striving to make trade between their member countries more efficient without relying on external currencies like the dollar. China, European Union and Russian are upcoming super powers that want to free themselves from depending on the US dollar as the means of global trade. These upcoming systems on top of the US economic issues will make the dollar less used leading to a collapse that will let gold take over as a global standardized currency for global trade.
In conclusion, the US dollar is still the number one currency in the world when it comes to global trade but for the past few decades, the dollar dominance has been shrinking. The dollar collapse will not happen instantly but it will be a slow gradual process that might take years. Also, a big global economic crisis is about to come and based on the state of the US economy, the United States will be hit hard and this might be the final blow to the dollar dominance. The central bankers are ahead of time and this is why they are buying as much gold as they can. They have already lost faith with the system. The shift to gold, huge debts and uncontrolled printing of money are some of the signs that are giving us a glimpse of what might happen in future. This will bring a new dawn where they world will need a very stable system that can facilitate the global trade and gold and silver will be the default option. In our case, gold has proven itself as a recession proof and extremely stable form of payment. We might also see a rise of a new currency that will be backed by gold 100 percent. It is clear that the dollar is very unreliable and soon things will change and we might have a system that is based on gold. The best thing you can do is to prepare!