In March 2023, the United States experienced a severe economic downturn, with a series of major bank failures. Among these was the Silicon Valley Bank, a top-20 bank in the country with more than $215 billion in assets, which suffered a loss of $1.8 billion due to increased interest rates on US Treasury securities.
Shortly thereafter, the New York-based Signature Bank, with over $110 billion in assets, collapsed due to exceeding the maximum deposit limits set by the US Federal Deposit Insurance Corporation.
The stock price of First Republic Bank, with over $215 billion in assets, also plummeted by 67%, and Western Alliance Bancorporation’s share price fell by a staggering 90%.
Moreover, nearly all of the leading private banks in the US saw their credit ratings downgraded. The common thread in all of these bank failures was the impact of rising interest rates on US Treasury bonds. These developments have raised concerns about a potential economic doomsday scenario for the US, given the scale and speed of the bank collapses.
As the demand for the US Dollar is decreasing in the world, these bonds are also falling, and in order to make them float, banks have no solution but to offer higher interest rates, which burn holes in their liquidity. And when Renowned economist Dr. Nouriel Roubini, also known as ‘Dr. Doom,’ who predicted the global recession of 2008 with utmost accuracy, is not only predicting another global economic collapse but also cautioning that this time, problems are going to last long, maybe a decade or more. One of the main reasons for this upcoming recession would be de-dollarization.
what is de-dollarization all about ?
De-dollarization ,a word that is trending on the economic world these days, refers to the process of reducing or eliminating a country’s dependence on the US dollar as a medium of exchange, store of value, and unit of account in international transactions.
This process can occur for various reasons, including concerns about the stability of the US dollar, political tensions with the United States, or a desire to increase a country’s economic independence.
De-dollarization involves diversifying a country’s foreign exchange reserves, promoting the use of alternative currencies, or creating new regional currencies. For example, some countries have turned to the euro, the yuan, or the yen as alternatives to the US dollar in their international trade and financial transactions.
The Tsunami of inflation and The “BRICS”
As the world moves away from the U.S. dollar as a world reserve asset, dollars will be dumped globally, causing a “tsunami of inflation” in the United States.
Interest rates will rise accordingly, followed by a “collapse” in asset prices, which would be used to usher in Central Bank Digital Currencies (CBDCs) and The Great Reset.
This dire scenario is the forecast of Andy Schectman, President and Owner of Miles Franklin and an expert on monetary and economic history.
Schectman, who has three decades of experience in the precious metals sector, said that the BRICS (Brazil, Russia, India, China, and South Africa) coalition could lead the charge to develop their own reserve currency which would compete against the U.S. dollar.
The BRICS are meeting in Durban, South Africa in August, and one of their agenda items is the development of an alternative to the U.S. dollar.
The dollar’s “weaponization” during the Russian war with Ukraine has hastened the move to “dump” dollars.Western sanctions on Russia, as well as expelling Russia from the SWIFT payment system, has had a chilling effect, deterring other nations from using the dollar.
Saudi Arabia, who has recently stated that it is open to accepting other currencies in exchange for its oil, as a potential catalyst for massive de-dollarization.
“Experts stated that all it would take [for de-dollarization] would be for Saudi Arabia to stand up on the stage… [and say,] we’re now going to consider taking up other currencies for oil,” .If it happens, all of the countries that had to hold dollars for the last fifty years, will no longer have an interest in holding them. And if they all start to dump dollars, a tsunami of inflation will be hitting the shores of the West.