A Warning From History

How the Dollar Will Die Were you forwarded this email? [Sign-up to The Daily Reckoning here.]( [Unsubscribe]( [Daily Reckoning] A Warning From History - The dollar begins to challenge the British pound sterling after WWI… - “World money” solves Triffin’s dilemma… - The SDR may finally be ready to emerge as a rival to the U.S. dollar… Recommended Link [New “$2,000,000 Prediction”]( [Read more here...]( Jim Rickards is famously known for his game changing predictions throughout his career… But now Rickards has just issued what he says is, “The biggest prediction” of his career... One he is extremely confident will happen… that there is currently an estimated $2,000,000 connected to it. [Click Here To Watch His Video]( Portsmouth, New Hampshire March 9, 2021 [Jim Rickards] Dear Reader, The days of the U.S. dollar’s global dominance are nearing an end. Investors need to prepare for a world without the American currency at its center. It’s not going to happen overnight, but it could happen sooner than many people think. Let’s explore the reasons why the world will abandon the U.S. dollar using the last time a major reserve currency died as our guide. In June 1914, the world viewed from London was a global enterprise zone in which British military, diplomatic and financial power reigned supreme. There were competing powers, of course, but the U.K. was the most powerful politically. London was the unquestioned financial capital of the world. The pound sterling was the leading global reserve currency. And it was backed with gold held by the Bank of England. Sterling was “money good” on five continents. When World War I began, all of the major belligerents immediately suspended the conversion of their currencies into gold except the U.K. The conventional view was that countries needed to hoard gold and print money to pay for the war, which is why they suspended convertibility. The U.K. took a different approach. By maintaining the link to gold, London maintained its credit standing. This enabled the U.K. to borrow to pay for the war. It was John Maynard Keynes who convinced the U.K. to remain on the gold standard. And it was Jack Morgan, son of J.P. Morgan, who organized massive loans in New York to support the British war effort. Initially, there were huge outflows of gold from the U.S. to the U.K. But this gold outflow from the U.S. soon ran its course. The Dollar Emerges In November 1914, the flow of gold suddenly reversed. The British needed U.S. exports of food, wool, cotton, oil and weapons. All of this had to be paid for in either gold or pounds sterling that could be converted into gold. The gold that had flowed east from New York to London now began to flow west from London to New York. From November 1914 until the end of the war in November 1918, there were massive gold inflows to the Federal Reserve Bank of New York and its private member banks. It was at this stage that the dollar emerged as a new global reserve currency to challenge the supremacy of sterling. The process of the dollar replacing sterling began in November 1914. But there was no immediate or sudden collapse of sterling. Throughout the 1920s, the dollar and sterling competed side by side for the role of leading reserve currency. But by 1931, the race was becoming one-sided. The dollar was starting to pull away. Winston Churchill had blundered by pegging sterling to gold at an unrealistic rate in 1925. The super-strong sterling that resulted decimated U.K. trade. It also put the U.K. in a depression three years before the rest of the world. The rise of the dollar and the steady decline of sterling continued through the 1930s until the start of World War II. At that point, the U.K. suspended the convertibility of sterling into gold. The international monetary system broke down. Normal trade, currency exchange and gold convertibility remained suspended until the international monetary system could be reformed. Recommended Link [Biden’s Next Move Will Catch Most Americans by Surprise]( [Read more here...]( In his first week in the White House, President Biden broke all records by signing 19 executive orders… But it’s this move from one of his agencies that will catch most Americans by surprise. Warning… If you wait until you hear it from the mainstream media, it might be too late for you to take any action. [Click Here For The Full Story]( Bretton Woods Enshrines the Dollar as World’s Leading Reserve Currency This reform took place at the Bretton Woods international monetary conference held in New Hampshire in July 1944. That conference marked the final ascendency of the dollar as the leading global reserve currency. From 1944–1971, major currencies, including sterling, were pegged to the dollar. The dollar was pegged to gold at $35.00 per ounce. It was the definitive end to the role of sterling as the leading reserve currency. The conference enshrined the dollar in that role — a position it has held ever since. Bretton Woods also led to the creation of the IMF to help oversee the world currency markets. And it set the stage for the new world money… At the beginning of the Bretton Woods system, the world suffered a “dollar shortage.” If the dollar was the leading reserve currency, how could global trade and finance grow if there were not enough dollars to go around? In the 1950s, the U.S. began to pump out dollars at a prodigious rate, first through the Marshall Plan and then through Korean War spending. Gradually, the gears became unstuck. Countries like Germany and Japan began earning dollars by exporting Volkswagens, transistor radios and other consumer goods that Americans wanted. By the 1960s, the “dollar shortage” turned into a “dollar glut.” U.S. trading partners ran up huge dollar surpluses. These trading partners began cashing in their dollars for gold from Fort Knox. By 1968, the steady drain of gold from Fort Knox had become a run on the bank. By 1970, the U.S. gold hoard dropped from 20,000 tonnes to 9,000 tonnes. Triffin’s Dilemma By then a Belgian economist named Robert Triffin articulated what became known as Triffin’s dilemma. The idea was simple. In a world based on dollars as the leading reserve currency, the U.S. would have to make dollars available to the world to finance trade and investment. But if the U.S. pumped out dollars through its deficits, eventually the U.S. would go broke, run out of gold or both. Triffin predicted the Bretton Woods system would collapse because the U.S. could not supply the world with enough dollars without bankrupting itself in the process. He was right. The world had too many dollars and was dumping them for gold as fast as it could. The IMF (under U.S. direction) needed a solution. The U.S. would have to adopt structural reforms to fix its deficits in order to save the dollar. But such U.S. austerity implied a return of the “dollar shortage” and a global recession. There was not enough gold at the official price to fill the shortage. And no other currency was strong enough to replace the dollar. What the world needed was a new form of money… The Fed has a printing press and can print dollars. The European Central Bank has a printing press and can print euros. The same is true of other central banks around the world; they can each print their home currencies. But, far fewer know that the International Monetary Fund (IMF) has a printing press also. They can print a kind of world money called the Special Drawing Right (SDR), which was created in 1969. The IMF can hand them out to the 190 countries around the world that are IMF members. This is rarely done. It was last done in several tranches in 2009, both in response to the 2008 global financial crisis and to compensate certain members who had missed earlier allocations. Before that, the last issuance was in 1981. However, the IMF is now moving quickly to issue new SDRs to help reliquify the world in the wake of the pandemic panic and recession. Recommended Link [The secrets in this book will make your landlord see red]( [Read more here...]( But all you’ll see is green when you discover how to earn monthly income from real estate without all the hassles of being a landlord. Over a dozen “lazy” real estate secrets ready for you to take advantage of. [Click Here To Claim Your Copy]( SDRs May Finally Be Ready to Challenge Dollar The current consensus among the top countries in the IMF (basically the G20 which includes the G7 plus China, Brazil, India and some other major economies) is that the new issue should be $500 billion. However, as much as $650 billion could be issued without further approval from the U.S. Congress. (The U.S. is the largest member of the IMF and has veto power over certain major IMF actions). Changes in the IMF issuance process may already be in the works. These can include special allocations to poorer countries; right now the allocations are in proportion to your IMF capital account, which means richer countries like the U.S. get more than poorer countries. It is also possible for the IMF to issue SDRs to non-member entities such as the United Nations to be used for climate change programs. After decades of sleeping on the sidelines, it looks like the SDR is ready to wake up and assume a role as a new major reserve currency controlled not by the U.S. but by the IMF executive committee, which includes China as a powerful member. This process will take time, but it has now begun in ways that are different from prior SDR allocations. The SDR may finally be ready to emerge as a rival to the U.S. dollar as the reserve currency of choice for China, Russia and the developing world. The dollar is heading for the fate as the pound sterling. Regards, Jim Rickards for The Daily Reckoning Editor’s note: The U.S. may be on the verge of getting the inflation many have long predicted. Commodity prices have increased substantially within the past few months. Hard assets like gold and silver might just be your best defenses against inflation. And in our eyes, there’s no more reliable source for precious metals than [Hard Assets Alliance.]( The Alliance, of which we are proudly a part (full-disclosure: we get paid for bringing in new “Alliancers”), operates on the principle of simplicity. They’ve made the act of buying, holding, and taking delivery of precious metals easy as ever. 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