The leader of the world’s most populous Muslim-majority country has suggested that Indonesia must reduce its dependence on foreign payment systems to negate the risk of a potentially disastrous economic fallout should the country ever come into crosshairs of Western sanctions.
This can be very good for the US. As we industrialize again we need solid trading partners. The rise of Indonesia would enhance our economy and make for a better defense against China’s military.
This does not change the value of the dollar other to enhance the US economy longer term. It strengthens the dollar if anything. Holding countries down often by their own actions does not mean the dollar appreciates. That is not how it works. Trading with stronger countries like Japan and Germany make for a stronger dollar.
Methinks you are “nailing the coffin” closed long before the patient is dead. There’s a reason things coalesce around a common standard; you can see it with Facebook, Google, iPhone and other things in the physical realm. It works that way in the financial world too; not that there aren’t alternatives and pretenders, just that it takes a lot to become “the standard” - and the dollar is.
You apparently don’t like that, but you might as well howl at the moon. Someday, as with the British pound, Spanish doubloon, and others you will eventually be right - but today isn’t the day.
Well of course it will. Also: the tides will rise and fall, there will be a revolution somewhere next year, and the sun will someday explode. The important thing is “when”? If the dollar becomes just one of many, maybe that’s important (I note that the pound, yen, and renminbi seem to function reasonably well for their respective countries). Maybe it’s not.
It just seem spectacularly premature to talk about “nails in coffins.”
As far as I can tell, the speed is glacial. The dollar as the world’s reserve currency hit its apex in about 1974 when Bretton-Woods dissolved. Since then it has lost ground mostly to the Euro, and more recently to a whole basket of other currencies like the Canadian dollar. The renminbi is still an afterthought as far as global trade goes. And FWIW, the renminbi has a weak peg to the dollar, so it is like having dollars anyway.
I suspect that gold may have something to do with the dollar’s demise/replacement.
US sanctions have accelerated the process
The flight of central banks to gold would suggest the geopolitical backdrop is one of mistrust, doubt and uncertainty” after the US and its allies froze Russia’s dollar reserves, said Adrian Ash, head of research at BullionVault, a gold marketplace.
I suspect it doesn’t. To make an international transaction, you need something that functions as unit of account, medium of exchange, and store of value. Gold doesn’t meet the first two criteria, and it really bad at the last one.
I view the MX China agreement a little differently.
China is using it’s New Silk Road initiative to form alliances all across Latin America.
Paraguay and Brazil are using Chinese “help” to connect amazonian goods with the Pacific coast, via a super highway and railway.
Lithium in Argentina is under Chinese control.
Honduras wants part of that pie, and is dumping it’s support for Taiwan, for development funds from China.
Now MX is considering a Chinese alliance?
The US used the military to enforce the Munroe Doctrine. With resulting banana republics, CIA abuse/overthrow of elected governments, brutal puppet dictators with US support, is it any surprise Latin countries don’t trust the US?
The BRICS are linked by distrust of the West, their historic overlords/abusers. And especially the US with it’s “international” companies that engage in unregulated capitalism - enforced by CIA, proxy wars, puppet dictators, etc.
There’s a YouTube with a title something like “China is Russia’s Biggest Threat”.
It appears to me that China is the US (West) biggest threat.
Ukraine is an opportunity to knock Russia out. Destroy it’s economy so that it’s not a strong ally for China.
I see China allied with PRNK and Iran as the threat.
Alliances and economic ties with India, South Africa, the Solomon islands, MX Central and South America keep these countries from supporting the US/West.
Suppose you have a gold backed dollar and deposit it at a bank.
Suppose the bank does what banks do, lend out the dollar. Well it can’t lend out the whole dollar, it keeps two gold backed dimes as reserves. Then it lends out 64 cents of the 80 cent new account and so on. The bank winds up with one gold backed dollar deposited and five paper backed dollars accounts. There is no gold backing for the new dollars magically created.
That is the story of the gold backed fractional reserve banking Ponzi scheme unless the bank hires worthy alchemists.
The purpose of gold as money is to reduce fraud. Currency is all about trust and nothing else. As long as the US economy is strong the dollar is strong provided the Fed does not print and circulate too many forgeries. When it does we call the crime by the benign name ‘inflation,’ the stealing from the people at large scale.
Two problems with that. First, you can’t “just use” a gold-backed currency to replace the dollar because there are no gold-backed currencies. They do not exist. Therefore cannot be used.
A second problem is that no central bank has no where near anything even remotely close to the amount of gold needed to issue a gold-backed currency. So they couldn’t even if they desperately wanted to.
Couldn’t the central banks just revalue gold? This would solve a lot of problems for them and fix their balance sheets:
The more debt is being accumulated on the balance sheets of European central banks, the more likely they will revalue gold to write off this debt. When I asked the German central bank if they consider this option they replied: “at this stage, we prefer not to speculate about any potential decisions … that might or might not be taken in the future.”
Central banks are hovering the yellow stuff up - there must be a reason for this:
Put forth thy hand, reach at the glorious gold
Dunno. I don’t really know what that means. The article you linked to made it sound like they could somehow calculate the value of their gold reserves, which would make debt go away for some reason.
None of that seems to apply to a gold-backed reserve currency. The price of gold is set on the open market I don’t see how they can arbitrarily change the value. Even if they did, I don’t see how it matters. Their debts are denominated mostly in Euros. That means they have to pay in Euros.
Just for fun, let’s do a back of the envelope to see how much gold a central back would need to own to issue a gold-backed currency to replace the dollar. Google tells me there is about $5 trillion USD held by foreign central backs and in circulation overseas. So you need about that much right off the bat. But you also need enough for your own citizens, companies, and government to use internally. Otherwise there is literally no point in doing this. So, let’s say another trillion or two. So, you’d need about $7-ish trillion.
Now, let’s pick a candidate. How about the from the first post in this thread? India. World’s seventh largest economy, rapid growth projected, wouldn’t mind sticking it to the US and western hegemony. Checks all the boxes. The World Gold Council estimates India’s central bank gold reserves at about $50 billion. So India would only have to increase its gold reserves by about another $7 trillion.
And let’s see…it turns out the total value of gold bullion in the world is about…$7 trillion! So it is theoretically doable. All you have to do is buy all the gold in the entire world.
But on the positive side, for that $7 trillion investment, your borrowing becomes slightly cheaper and makes doing overseas business easier. On the downside, if the price of gold moves against your currency, that $7 trillion will turn into smoke. So huge cost, enormous risk, and small reward. I can’t imagine why no country hasn’t jumped right on this.
The price of gold is fixed as follows, and it’s nothing to do with the open market:
Gold prices are set by several banks, an oversight committee, and a panel of internal and external chair members, who calculate the figures based on supply and demand in the gold futures derivative markets and establish averages for both the spot price and the fixed price.
Comex (CME) in the United States, and the London Bullion Market Association (LBMA) in the UK, operate these major derivative markets.
Typically, when you buy and sell gold bullion the price is agreed on the gold commodity spot price. This is a theoretical price for a set weight of gold prior to being refined, and fluctuates according to supply, demand, and currency strength. Under a spot price contract, the price is set by the market at the time of purchase.