Digest: Why the Great Dollar Collapse Began on March 28, 2023

Plus, You Won’t Believe Who the Largest Owner of Farmland in America Is…

Welcome to the digest… my breakdown of the things we’re thinking about and talking about in the Global Intelligence world.

First up this week… in the future, when economists and historians write about the end of the dollar era, they could very well point to March 28, 2023 as the day it all started to collapse.

As I’ve been writing about for many years now, major countries around the world are pursuing “de-dollarization”—the process of reducing the dollar’s status in the global economy.

Right now, Uncle Sam’s greenback is the currency of global trade, a role it has played since 1944. Most global trade payments are settled in dollars, whether that’s Taiwan selling TVs to Australia, Japan buying coffee from Colombia, or Ireland sending beef to China.

This gives the U.S. a massive economic advantage.

Every other country has to pay currency exchange rates when trading globally. The U.S. does not. There is also massive global demand for the U.S. dollar to facilitate international trade payments… which keeps the price of the dollar artificially high and enables the U.S. government, businesses, and consumers to borrow more cheaply than other countries.

Major economies have long sought to steal this advantage away from America… to end the dollar era.

China, in particular, has made this a major goal, and late last month it took a huge step toward making that a reality.

On March 28, France’s TotalEnergies supplied China’s National Offshore Oil Corp. with 65,000 tons of liquefied natural gas imported from the United Arab Emirates. What’s significant is that the trade was settled in the Chinese yuan, not the dollar.

This marks the first-ever LNG trade settled in China’s currency. And it comes as China is pushing Saudi Arabia to allow some oil trades to be settled in yuan.

At present, all Saudi oil sales are settled in dollars. But just this week, the Saudi leadership said it is no longer interested in “pleasing America,” which likely foreshadows the Saudis willingly pricing oil in yuan.

China is trying to end the dollar’s hegemony over the global economy… and it is succeeding.

The world is diversifying away from the dollar. So, as investors, we should do the same by moving a portion of our wealth into gold, bitcoin, and the safe-haven Swiss franc.

Indeed, also in late March, French Bank Société Générale said that it is maintaining its long gold position in its multi-asset portfolio because of expectations of a weaker U.S. dollar.

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Next up… worrying signs for inflation (and the dollar).

Core inflation in the eurozone (the 20 EU countries that use the euro as their currency) hit a record high in March, demonstrating that rapid-rate interest rises by central banks have failed to cool the pace of price increases.

According to EU data, general eurozone inflation fell to 6.9% in March, from 8.5% in February.

However, core inflation, which excludes volatile food and energy prices, rose to 5.7% from 5.6%. That’s its highest level since the euro was introduced in 2001.

This is deeply worrying for Europe’s central bankers, as core inflation is considered a better measure of how entrenched inflation has become in an economy.

This means it’s highly likely that the European Central Bank will raise interest rates again at its next meeting in May.

That, in turn, will likely weaken the dollar since this will bring eurozone interest rates closer to those in the U.S., which will encourage traders to sell dollars to own euros.

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Finally… a question—Who is the single largest farmland owner in the U.S.?

Answer: Bill Gates.

The Microsoft founder reportedly owns 275,000 acres purchased over the past decade. And he’s not the only billionaire investing heavily in farmland.

Ted Turner is the largest landowner in Nebraska and has major land-holdings in other states, too. Warren Buffett has described farmland as an investment with “no downside and potentially substantial upside.” And as I’ve previously reported here in our digest, even pro athletes like Joe Burrows have been investing in farmland.

So, why are all these wealthy investors turning to this asset class?

Farmland has a history of holding its value during turbulent economic periods. The amount of farmland in the U.S. is declining year on year. And farmland is positively correlated with inflation, which means it tends to rise in value as prices increase.

These characteristics make it an excellent safe-haven investment play.

And you don’t have to actually buy farmland to invest in it. You can own it through the stock market. (Check out our Global Intelligence Portfolio to learn how to do this.)

That brings us to the end of this week’s digest. Many thanks for being a subscriber. And if you have any feedback or questions, reach out through the contact form on the Global Intelligence website.

Enjoy the rest of your Sunday.

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