Two conditions must be in place before the dollar could collapse.
First, there must be an underlying weakness. Between 2002 and 2018, the dollar declined 6% according to the U.S. Dollar Index. Why? The U.S. debt almost tripled during that period, from $6 trillion to $22 trillion. The debt-to-gross domestic product ratio exceeded 100%. That increased the chance the United States would let the dollar’s value slide so it could repay its debt with cheaper money.
Second, there must be a viable currency alternative for everyone to buy. The dollar’s strength is based on its use as the world’s reserve currency. The dollar became the reserve currency in 1973 when President Richard Nixon abandoned the gold standard. As a global currency, the dollar is used for half of all cross-border transactions. That requires central banks to hold the dollar in their reserves to pay for these transactions. As a result, 61% of these foreign currency reserves are in dollars.
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PROMPTED BY A COMMENT FROM MY LUDDITE FRIEND:
Just like the now fake “half gallon” of ice cream, they also look for ways to save money.
True. But it’s not about “saving money”, imho it’s about “disguising the price increase” from “We, The Sheeple”. And subsequently placing the blame on the FED (note 1) who has eliminated “penny candy”. The dollar has lost almost all its purchasing power during our lifetime. All to facilitate the out of control spending by politicians and bureaucrats at all levels.
Argh! Makes me crazy. And not crazy haha, but crazy nuts that people don’t see it. Or if they do, they don’t care.
(note 1) The Federal Reserve Bank is a misnomer. IT ain’t “federal”. It reserves nothing. And, it ain’t a “bank”. It is a private cartel of the elite banks run for their benefit and that of the entrenched politicians.
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