Dateline: Makati, Philippines
Paul Krugman may be wrong on just about everything, but when he says “Fiat money is backed by men with guns”, we can find a point on which to agree.
His point here is a perfect metaphor for the state of world currencies.
In the latest development of dying fiat currency wars, France is lashing out against the dollar after its largest bank, BNP Paribus was fined $9 billion and a 1 year ban on trading in dollars.
Now the French prime minster Michel Sapin is calling for “rebalancing” of world currencies… and the end of the US dollar. He wants to bring the euro into more prominence in world trade, and plans to bring this up next week when he meets with eurozone finance ministers.
What did BNP do “wrong”?
BNP’s crime was to help countries like Iran, Sudan, and Cuba process $30 billion in transactions. This is illegal under USSA law, since the empire has sanctions against these regions.
Basically, the current American empire is setting the rules of the world on how the game will be played.
And it’s not just France. It’s also not just switching from dollars to euros.
Russian companies are also diversifying away from the dollar. Because of the strong arm of American imperialism and its sanctions that give it the ability to freeze funds at any moment, the Russian firms are being forced to settle many contracts in Asian currencies, mainly the Chinese yuan.
The trend around the world is clearly to avoid trading in US dollars where possible. Chinese officials are calling for a “new and more efficient system” where the dollar is bypassed, and the renminbi becomes the world’s reserve currency. Central banks and national governments worldwide are starting to hold larger proportions of non-dollar currencies.
In May this year, two banks in China and Russia signed deals to skip the dollar and pay each other in local currency.
Between all the moves mentioned above, and the US’s continuing reliance on debt being financed by developing countries in Asia via their cheap labor, the rebalancing that the French prime minister is calling for will happen.
And as China is set to overtake the Land of the Free as the world’s largest economy in the near future, look to them to lead the charge into the new non-dollarized era.
As it stands now, there are no world currencies left that are backed by anything but guns. We live in a fiat world. The American empire currently has the biggest guns- but it also has the largest deficit of any country on the planet.
How long can the dollar hang on based on military might and “faith”?
We don’t know. But reserve currency status cannot last forever. A good survival plan during these times of turmoil is:
1. Diversify your holdings. This doesn’t mean having accounts at Wells Fargo and Bank of America. This means setting up foreign bank accounts, owning some precious metals, and even some bitcoins. You can’t afford to be caught off guard and leave your future in the hands of reckless bureaucrats.
2. Have an escape plan. Second passports are essential, but expatriation can be a useful option to escape the final throws of a dying empire.
3. Bet on opportunity. In recent history, America has been where things are happening. Everyone looked to American entrepreneurs to lead the way in many industries. But times have changed. There’s a deadness in the Land of the Free that’s palpable. Opportunity has shifted. To Asia. To South America. Even to Eastern Europe. I have been traveling around the globe and identifying promising investments in up-and-coming areas- and there are many of them. Wealth doesn’t disappear, it just shifts.
4. Protect your assets. Clearly, keeping your money in a bank, even a safe deposit box, isn’t safe, when the laws let anyone with the proper badge reach into your account and take whatever they’d like for whatever reason. It’s important to know where your money is safest, and in what form.
The US dollar continues to lose ground to other currencies, despite it being backed by the largest military in history. It can throw its weight around in some cases, but even this tactic is losing steam. As the trend of countries around the world willing to do business in other currencies continues, there isn’t much the US government can do to prevent the eventual loss of world currency status.
Fines, sanctions, and wars may continue in the future, but these will only serve to sink the dollar even faster.