The Dollar’s Slow Demise Continues in Plain Sight

“The end of the world’s present monetary system is already taking place,” says one of Mexico’s leading, hard-money economists, Hugo Salinas Price. “The U.S. is losing influence in the world… The end of the dollar as the basis of the international monetary system means the end of the U.S. as we have known it.”

You may or may not know of Salinas Price, but he’s a serious player at high monetary levels.

He’s not nearly as famous as most television talking-heads on mainstream U.S. media. However, he’s been following monetary issues for many decades. He’s a Mexican business magnate and founder of the Mexican retail chain, Elektra. He also happens to be a historian of money.

According to Salinas Price, “The present monetary system of the world, based on the dollar, is on its death-bed. A fiat currency — such as the dollar — cannot be replaced by another fiat currency,” he explains. “Therefore, the world will necessarily have to take up (precious metals) as the world’s money.”

Salinas Price does not foresee the U.S., or other leading Western nations, taking the lead in resolving their own currency issues. Instead, he thinks, “it is likely that the Eurasian Bloc will initiate the monetary transformation of the world, in due course.”

Specifically, he foresees China and Russia creating a gold- and/or silver-backed currency to conduct trade. Salinas Price himself has long urged Mexico to adopt a silver-based currency, to retain value inside that nation’s economy, using the peso.

Globally, there’s an obvious flight to hard currency. Whatever may happen with the day-to-day price of “paper gold,” all of the physical metal, from every mine, mill and refinery in the world, has a buyer for every ounce.

A Different Kind of Russian Collusion

Just follow the data for proof…

China, Russia and India are all accumulating massive amounts of gold. Other large amounts of gold are moving into the Middle East, and other Asian nations. For example, below is a recent graph, showing Russia’s steady accumulation of gold over the past decade.

Russian Central Bank Gold Reserves

This kind of gold buildup in Russia is no accident. Russia has a clear, national policy to accumulate gold within its state treasury. That’s because Russian policy makers are concerned about U.S./Western actions, including economic sanctions, NATO expansion, near-constant and long-term bellicose rhetoric and more.

Russian policymakers are pushing back, as you likely know from following the news. Russia is confronting the U.S./West not just directly — by building submarines and missiles, and deploying troops into Syria, for example — but also via asymmetric means.

One U.S./Western weakness, in the eyes of Russian policymakers, is the dollar — the currency used for international trade. Russian strategists detect a long-term decline of value and global significance for the U.S. buck. It’s a wide-open target for asymmetric push-back.

According to a recent report in Russia’s Sputnik News, “In the years to come, global financial markets will see a significant devaluation of the American currency… Russia and China continue to stockpile gold in a bid to cut their economies’ dependency on the U.S. dollar in the future.”

Radical Political and Economic Transformations Will Increase as the Dollar’s Global Role Decreases

In summary, Sputnik states that, “if the dollar’s role as a global reserve currency is decreased, the world will see radical political and economic transformation.”

Right now, nearly 60% of global trade is denominated in dollars. By stockpiling gold, Russia and China want to gain monetary independence, while reducing their respective reliance on the dollar.

That approach, outlined in Sputnik, parallels what other high-level Russians have stated about their national monetary strategy.

Sergey Glazyev, a well-placed Russian politician and key Kremlin player, recently declared: “As soon as we (Russia) and China dump the dollar, it will be the end of the U.S. military might.”

In an interview with Russian News Agency TASS (successor to the old, Soviet-era TASS news service), Glazyev explained, “The United States has no tools to make all others use the dollar other than a truncheon. That is why they are indulging in a hybrid war with the entire world to shift their debt burden on to other countries, to confine everyone to the dollar and weaken territories they cannot control.”

Per Glazyev, the “only way to stop U.S. aggression is to get rid of dollar addiction.”

The Final Flailing of a Failing Empire

In the West — and certainly in the U.S. — there’s a tendency to dismiss this kind of pro-gold/anti-dollar thinking and commentary by Russians. In fact, it’s a stretch for most people to imagine any world in which the dollar is not king.

Yet, more and more global trade is moving away from dollar denominations. Russia conducts much of its trade with China in rubles-yuan, with a gold exchange in Shanghai to ensure proper valuation. Plus, you’ve likely heard of China’s efforts to conduct more and more trade across the world in yuan, all backed by the Shanghai Gold Exchange.

Indeed, Beijing is even working with Saudi Arabia to displace the petrodollar as the basis for pricing oil exports to China. China already imports oil from Russia, Iran and Angola, priced in yuan and those yuan are tradable for gold. Looking ahead, if China breaks the Saudi link to the petrodollar, there’s no telling what the repercussions could be in other sectors of international trade.

Gold and silver are making a monetary comeback.

We’re fast approaching a new monetary tipping point. The next global trading system is already setting up, in plain sight, as long as you follow the facts and note who is buying gold bars, and where that metal is heading.

What can the individual investor do?

Well, if you don’t hold physical precious metal, get some. And if you are not well-invested in precious metal mining shares, you need to get there.

Echoing Jim Rickards, I believe that you should have at least 10% of your portfolio devoted to precious metals and mining shares; more, if it helps you sleep better at night.

Regards,
Byron King
for The Daily Reckoning

David