Project Dunbar and the Dollar’s Demise

I’m betting you’ve not heard of Project Dunbar.

Nor Project Icebreaker.

What about Project Nexus? No, too, there as well, I’d bet.

And, no—I didn’t conjure up those terms as part of some cute marketing gimmick.

All three are very real.

Just that the Western media isn’t writing about any of them. I’ll go so far as to say the Western media hasn’t the foggiest notion that those projects even exist… or that they promise to fundamentally change the mechanism by which countries conduct global trade.

I know they exist because of my global travels over the decades and the random corners of the world where I try to stay plugged in.

It’s best you know about these projects because they promise to shape the future of the US dollar… which means they promise to shape your future as an American who earns, spends, and saves in dollars.

Now, before I tell you how Project Dunbar and the others will bull their way through the china shop of your life, let me first tell you that Project Dunbar is part of the reason I’m hosting an event in Ireland in October—a small-gathering of like-minded folks who understand that the US is moving in the wrong direction, that the rest of the world is beginning to move in the opposite direction, and that the repercussions flowing from those two realities will have profound impacts on America, the dollar, and American families.

I also know that lots of folks don’t want to hear about the iceberg. They just want to savor their cruise across the North Atlantic without having pesky observers like me constantly announcing “Iceberg dead ahead!” when they’re trying to enjoy the band and sip their cordials in peace.

But someone has to sound the alarm.

Even if most people ignore it.

Back to Project Dunbar….

A few years ago—2022—some central banks got together to test a theory that financial institutions could use so-called “central bank digital currencies,” CBDCs, to transact directly with one another on a shared platform. The purpose: To demonstrate “the potential to reduce reliance on intermediaries and, correspondingly, the costs and time taken to process cross-border transactions,” according to one of the participant central banks.

We’ll come back to that sentence in a bit. Just remember the phrase “reduce reliance on intermediaries.”

The central banks participating in Project Dunbar were the Reserve Bank of Australia, Bank Negara Malaysia, the South African Reserve Bank, and the Monetary Authority of Singapore (the source of the quote above).

Project Dunbar was a success. Singapore’s central bank reported that the prototypes developed “demonstrated the technical viability of shared multi-CBDC platforms for international settlements.”

That success spawned projects Icebreaker and Nexus. Those two projects set about to test a similar CBDC arrangement with the Bank of Israel, Norway’s Norges Bank, and Sweden’s Sveriges Riksbank (Project Icebreaker); and Bank Negara Malaysia, Bangko Sentral ng Pilipinas, Monetary Authority of Singapore, Bank of Thailand and Reserve Bank of India (Project Nexus).

All those projects occurred under the stewardship of the BIS Innovation Hub, the financial innovations arm of the Bank of International Settlements, which is basically the central banker for central banks.

It is here that we need to slow our roll for a just a moment so that I can share with you this seemingly random sidenote: Reserve currencies are not a function of contractual obligation. It’s handshake kinda thing. You, the country hosting the global reserve currency, keep your house in order, and we, the world at large, won’t lose confidence in your money.

No doubt you know where this is going…

The world is losing confidence in America, the American political system, and America’s extreme debts. So, it’s stepping away from the US dollar.

Europe offers up some “for instances”…

• Danish and Dutch pension funds are reducing their unhedged exposure to the US dollar.

• Several Swiss pension funds are now underweighting their exposure to USD.

• A significant number of defined-benefit pension plans in the UK are now looking to reduce their exposure to the dollar.

As Bloomberg phrased it in a headline:

            European Pension Funds Risk Driving Sharp Dollar Sales.

Translation: pension funds are dumping dollars because America and its currency now represents a risky asset.

The global financial system is simply moving away from reliance on the US dollar, what I will call, “The beginning of the end of American financial dominance.”

For 80 years, the rest of the world believed in American exceptionalism. So, they put their cash to work in the American economy. They funded America’s growth—cheaply—by pouring cash into the US Treasury market, in effect giving Uncle Sam exceedingly cheap loans that America used to build a debt-addicted society of debt-addicted borrowers at the governmental, corporate, and household levels.

Now they’re questioning the wisdom of continuing that strategy.

They look upon the fruited plains and they don’t see economic genius.

They see fiscal insanity.

They see political lunacy.

They see a society pulling itself apart over fundamental differences so divergent that there is no bridge to compromise. Screw the gray! This is black and white… or, rather, red and blue.

I’ll note here that not a single reserve currency has ever survived.

Not one.

They’re all dead, except for the dollar.

What killed them is telling: Economic hubris—the belief that, after so many decades ruling the world, their primacy was entrenched. Never changing. A financial birthright.

And then history stepped up to announce, “Hold my beer…”

We’re seeing that now as the dollar’s relevance fades in real time.

Project Dunbar and the others are helping with that.

I told you we’d come back to “reduce reliance on intermediaries” and here we are.

That “intermediary” is the US dollar. Since 1944’s Bretton Woods Agreement that established the greenback as the currency of global trade in a post-war world, the dollar has served as lubricant for moving TVs from Japan to Brazil, and beef from Argentina to the Czech Republic.

But Project Dunbar showed that, by using CBDCs, the world no longer needs the intermediary. Countries can just trade amongst themselves in their own currencies, or maybe even regional-currency baskets that will spring up.

Project Nexus, the Dunbar spin-off that includes central banks in Malaysia, the Philippines, Singapore, Thailand, and India will officially launch next year, delivering a fast and cost-efficient cross-border payment to 1.7 billion people—20% of the planet.

The dollar will not lubricate any of that trade. All trade will be in real-time between the countries, using their local currency.

Not a Ben Franklin in sight—the very purpose of the project to begin with.

This is just one of the many, many examples of the world purposefully reducing its reliance on America’s money.

As demand for dollars falls, the value of the dollar falls relative to other currencies… which means the cost of living in America rises, because the US must import various raw and finished products that it needs. As the dollar declines in value, those products cost increasing more in dollar terms. (No, the US cannot cut off imports to quell inflation, because that would only cause greater inflation as 330 million fight over the limited resources that exist within the US. Plus, quality of life would degrade as entire categories of products cease to exist on American store shelves.)

Basically, what I’m saying is this: Come to Ireland. Share a whiskey with me. And learn how to protect your wealth from the damages that Project Dunbar promises to bring to your personal finances… and profit from the world to come.