The Dollar Is Doomed—Here’s Why

The problem with being early is that no one remembers.

You make a bold prediction.

Most of the world ignores it.

Those who acknowledge it, generally shake their heads and feel bad for you… because you’ve clearly lost your mind.

And then later, when your prediction proves to be right, your bold call is lost in the tides of history. No one remembers. But everyone is now talking about exactly what you said would happen…

Two cases in point from my own history:

1. 2013: I wrote that the America we know today—50 unified states—was quite likely to cleave apart, with various states pursuing secession. It was clear as day back then: Left and Right America simply did not see eye-to-eye in any way that would lead to the continuation of a “united” body of American states.

And here we are today with secession talk out in the open. Texas wants out. It’s done with the Biden administration and D.C. in general.

Lots of Californians want out, too. Many see a national divorce as the only way to avoid a second civil war. Even loudmouth members of Congress are calling for a separation of states.

That will happen… but we’ll come back to that in another dispatch soon.

My main point today is this:

2. In 2012, I wrote about a meeting I had in the woods of Estonia with a former Soviet Politburo leader and economist. He told me that Russian central bankers were calling him every month for his help to build a global reserve currency with China—backed by hard assets.

No one—and I mean no one—bought into that bag of hot hokum.

And now?

Russia and China, as part of the BRICS group of countries (Brazil, Russia, India, China, and South Africa—plus some other members) are leading the charge for a new currency—backed by hard assets—that aims to replace the dollar.

It’s all over the news now.

People all over the world are talking about it and taking it seriously.

From the New York Times late last month:

“The dollar is finished as the world’s reserve currency,” Mr. Bove said matter-of-factly, perched in an armchair outside his home office just north of Tampa, from which he predicted that China will overtake the U.S. economy. No other analysts will say the same because they are, as he put it, “monks praying to money,” unwilling to speak out on the mainstream financial system that employs them.

“Mr. Bove” is Richard X. “Dick” Bove, who spent more than half a century as one of Wall Street’s most in-your-face bank analysts.

Many, the Times noted, look upon the 83-year-old as a “crank.”

That’s high praise in my world view.

The mainstream is the mainstream precisely because the people who swim in that toxic pool of insipid thinking are much too afraid to step out of line. You’ll never hear them tell you that the emperor has no clothes—even when we can all see it.

Few in American finance or the American media want to risk being wrong because the ridicule and ramifications can sting. Just look at what happened to hedge fund legend Michael Burry in the run up to the housing collapse…

He correctly saw exactly what was going to happen and why disaster awaited, and he placed big—big!—bets on the collapse in US home prices that he knew was preordained.

But investors in his hedge fund thought he was a complete idiot. A gunslinger tilting against a windmill that was never going to fall. The US housing market, 99% of the population believed at time, was rock solid. And besides, home prices never really go down…

And you know exactly what happened next.

The people who mocked Micheal Burry were themselves the morons. They pulled millions out of his hedge fund that would have turned into hundreds of millions in profits had they just opened their minds to the possibility that mainstream thinking was wrong…

Thus, today’s dispatch.

A decade ago, I told my readers at the time what was coming and why—and now it has arrived.

Now, I’m telling Field Notes readers what’s going to happen next: Demand for the dollar is going to disappear as more and more countries stop using the greenback for global trade, and as more and more countries sell out of the dollar to own the BRICs currency instead.

I know there are a gazillion voices telling you that a BRICs currency is laughable. That China and Russia, even if they succeed at building a currency, will never find many adopters. That the US dollar has nothing to fear. That the status quo is the status quo for a reason.

Such commentary—and I read those sentiments quite often—reminds me of a column a former Bloomberg writer penned in the early days of the first iPhone, when he called it a “luxury bauble that will appeal to a few gadget freaks… the big competitors in the mobile phone industry such as Nokia and Motorola won’t be whispering nervously into their clamshells over a new threat to their business.”

Turns out they probably should have been whispering nervously into their clamshells. Because the iPhone basically destroyed their business, leaving them as also-rans.

That’s a great analogy for what is likely to take shape with the dollar as the BRICs currency takes off… America will be left behind.

America has angered a great number of countries through the years, and those countries are all too happy to stuff a lot of their sovereign wealth into a currency backed by hard assets, rather than the US dollar, which is backed by nothing but mountains of debt. Not to mention, countries around the world will be quite happy to have nothing more to do with US politicians, who regularly threaten to burn the whole system down as part of some political stunt…

All I ask is that when what is now preordained comes to pass, you kindly remember that Jeff told you what’s coming and why.