“Currency collapses happen in slow motion at first. When the lack of confidence comes, it’s a waterfall effect and the currency collapses.”
– Damian White, Sr. Precious Metals Advisor
Despite the length of President Biden’s State of the Union address, there was a suspicious lack of serious discussion of the country’s greatest dangers: mounting debt, a declining dollar, and China’s imminent threat.
Watch this week’s Gold Spot to hear Scottsdale Bullion & Coin Precious Metal Advisor Joe Elkjer and Sr. Advisor Damian White explain the potential debt crisis, why the greenback’s dominance is threatened, and where investors can find protection.
Looming Debt Crisis
Every few years, Americans are subjected to an embarrassing political game of chicken surrounding the country’s astronomically high debt where politicians on both sides of the aisle try to use the crisis to further their political aims.
All too predictably, discussions have quagmired, leading many to wonder if the US will finally have to reckon with its insane debt which now stands at $31 trillion. On top of that, raging inflation is expected to rack up $850 billion in interest payments for this year alone.
Default or Dodge?
Bank of America’s CEO, Brian Moynihan, has said the financial giant is preparing for a possible default since “hope is not a strategy.” Heightened tension in Washington might lead to more fiery discussions than normal which could disrupt already shaky markets.
Most likely, the government will reach an agreement to lift the national debt ceiling in the eleventh hour, but that only delays the real problem. The issue of the nation’s unsustainable borrowing and spending is only getting worse which means the pain, whenever it arrives, will be that much more severe.
Dollar Demand Slows Globally
It’s important to note that reverberations from a debt crisis aren’t limited to America’s borders. Our government’s routine and brazen mismanagement of money are causing a lot of concern around the world as most countries rely on USD strength for economic stability.
As it turns out, soaring debt and a possible default aren’t the reassuring signs foreign governments need to back the dollar. This lack of confidence is one of the first signs of a potential currency collapse which usually start off slowly before falling off an edge.
Petrodollar: The Beginning of the End?
“The dollar is starting to lose its global grip. [This could be] the beginning of the end.”
Damian White, Sr. Advisor
The greenback’s final claim to reserve currency status has been upheld by the petrodollar. After abandoning the gold standard, the government convinced Saudi Arabia and other major oil producers to trade petroleum in USD around the globe.
This strategic move worked for 50 years, but our obsession with spending might deal the final blow to the dollar’s weakening grip on the world. Amidst a weakening dollar, countries are searching for workarounds to the Petrodollar matrix.
China is leading the charge by urging Saudi Arabia to accept the Yuan in lieu of the dollar, portending the rise of the Petroyuan. Also, the West’s aggressive sanctions against Russia have inadvertently buoyed the Ruble as the Kremlin is forced to invest in its own currency’s success to go around would-be punishments.
As the Dollar Dumps, Gold Pumps
There’s no telling how promptly the US dollar will enter freefall if the government doesn’t reverse its unbridled spending. Still, the dollar’s current weakness is guaranteed to have negative effects on paper markets.
In response, savvy investors are seeking shelter in gold to protect their investments from raging inflation and other economic pressures. In 2022, central banks scooped up record amounts of gold, and the buying isn’t expected to slow down any time soon.
Some of the most impactful changes in decades have occurred within just the past few years which is why we’ve decided to update our Petrodollar Report which you can download for free. The explanation of how China’s threat to dollar dominance is threatening investors is more pertinent than ever.