Here’s a question everyone is asking – will the U.S. dollar collapse? There are tons of videos going viral on social media asking what will happen if the world currency is replaced with something else? China and Russia are increasing their allyship and peace deals are being negotiated between Iran, Saudi Arabia and Brazil. What would happen if oil were bought strictly through this new currency? This could get really bad for the United States.
First thing’s first – what is a world reserve currency? A world reserve currency is a currency held in significant quantities by governments and institutions as a means of international payments, foreign exchange reserves and investments. In simpler terms, it’s the most liquid capital available in the international market for people to use in exchange for whatever it may be.
So what happens if the U.S. dollar collapses, and we must use a different currency? Let’s look at the six major world currencies we’ve had since 1850:
- Portugal (1450-1530) – Portugal created a dominant global empire. The Ottoman Empire closed off the traditional trade route to Asia, forcing innovation through advanced navigational technology. The Portuguese were able to reach Africa, Asia, and the new world. Portugal’s currency became the primary currency used in global trade, establishing military outposts along the coast of Africa, India, Malaysia, Japan and China. They became overextended. The empire eventually declined due to attacks in competition from other countries – mainly the Dutch, British and the French.
- Spain (1530-1640) – This currency lasted 110 years and combined forces with Portugal to form the Iberian Union. Spanish silver coins were the first global reserve currency recognized in Europe, Asia, and Americas. This happened due to abundant silver supplies from Spanish South America. Eventually, they collapsed through wars and revolutions by the mid 1600s.
- Netherlands (1640-1720) – Lasted 80 years. Their rise to global power resulted from the creation of the Dutch East India company – it was the first publicly traded, multi-international corporation in the world founded to protect the state spice trade in the Indian Ocean as well as assist the Dutch world. The Dutch defeated Portugal and Spain economically by positioning themselves to profit from European demands for spices.
- France (1720-1815) – Lasted 95 years. France was best positioned to be the next reserve currency. They achieved European dominance under Louis the 14th. However, he put France in massive debt due to wars, extravagant parties and implemented heavy taxes. The 1789 French Revolution was caused by an economic turmoil and public outrage. After a decade of civil war, Napoleon took over.
- Great Britain (1815-1920) – The industrial revolution combined with advanced ship building capabilities made Great Britian the most dominant navy in the world. Dominant navy equals dominant global trade. A motto was “The sun never set on Great Britian.” Eventually, World War I destroyed Great Britain’s economy and position as a reserve currency took on a massive amount of debt to win the war.
- United States (1921-Present) – Lasting 103 years as of present. The U.S. benefited massively from World War I – every country from both sides of World War I was borrowing money from the U.S. to pay the for the U.S. to build things for them. And during World War I, the States started transitioning from an under industrialized agricultural economy to an industrial manufacturing powerhouse.
However, the U.S. dollar did not become the official reserve currency until the post 1944 Bretton Woods Agreement. After the war, the U.S. basically had all of the gold in the world. Because of that, countries around the world agreed to treat the U.S. dollar like they treat gold. The dollar was redeemable in gold until 1971, which kind of changed the game.
How about today? The dollar is riskier, fragile. What did we learn from Covid-19? We relied on Taiwan for chips. We relied on China for pharmaceuticals, relied on China for manufacturing. Let’s look at the bright side – Apple is moving away from China to go to India. There is some reliability. Whether that does anything or not is irrelevant, but one has to be paranoid to think there is a possibility because during Covid, we were relying on China too much.
Henry Kissinger once said “Who controls the food supply control the people; who controls the energy can control whole continents; who controls money can control the world.” The U.S. controls the money. Sometimes when you have the control, there is a sense of entitlement, arrogance – you develop blind spots.
Am I saying something will go wrong in the next 12 months, 24 months, 36 months, five years, 10 years? No. But can it happen in the next 10, 20 years? Yes. If the U.S. gets too cocky and comfortable, somebody else will come in, take our lunch and then all of a sudden everyone’s looking around saying what happened to us? It can happen that quickly because technology moves very quickly.
To watch Patrick Bet-David’s entire video, click HERE.
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