By Lowell Ponte
“We are engaged in a new era of competition,” said President Donald Trump in his December 18, 2017 speech about America’s national security strategy. We face “rival powers, Russia and China, that seek to challenge American influence, values, and wealth.”
A week earlier, White House National Security Adviser H.R. McMaster foreshadowed President Trump’s meaning. China, said McMaster, was committing “economic aggression” and China and Russia “are undermining international order and stability.”
In his speech President Trump noted that “Economic vitality, growth, and prosperity at home is absolutely necessary for American power and influence abroad.” America’s might stands on two legs, one military and the other economic.
Much of America’s prosperity since World War II came from the Western economic system of the Bretton Woods Agreement, which made the U.S. Dollar the World Reserve Currency, the global money used to trade key commodities such as oil. The U.S. Dollar was to be pegged to the value of gold, and the currencies of favored nations were to be pegged to the dollar.
When President Richard Nixon in 1971 suddenly severed the dollar’s anchor to gold – fearful that allies such as France were about to demand all the gold in Fort Knox in exchange for their mountains of paper dollars – its “exorbitant privilege,” as one French official called it, as the world’s Reserve Currency was saved by a deal with Saudi Arabia, which kept selling its oil only for dollars in exchange for the U.S. military’s arms and blood defending the Saudis. In other words, they would prop up the dollar if we propped up the ruling Muslim Saudi royal family. We switched from the precious metal-backed dollars of our Constitution to “Petro-Dollars.”
China now threatens this fundamental part of the “international order” by being on the verge of creating the “Petro-Yuan” through contracts backed by gold to sell oil in exchange not for dollars but for China’s currency. This will send the value of gold soaring, ZeroHedge predicts, as “China Kneecaps The Dollar.”
The Petro-Yuan could at least share and thereby dilute the power of America’s global reserve currency monopoly – and might be the beginning of its end.
Instead of a world where other nations must acquire the fiat dollars we print at virtually no cost to ourselves, in the near future the United States might be compelled to acquire Petro-Yuans or other foreign currencies.
Our economic advantage, and therefore our future as the dominant world power, could be quickly fading into history. Betting your future on the dollar or dollar-denominated things such as stocks, bonds, or retirement plans could be a bigger gamble than most people believe.
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For a free copy of Lowell Ponte’s 2018 predictions in Real Money Perspectives, and/or a free copy of Craig R. Smith and Lowell Ponte’s latest book, Money, Morality & The Machine, contact: David Bradshaw at 602-918-3296 or email him at firstname.lastname@example.org .