Will the US Dollar Collapse?

  Dollar Collapse
                    
 

Yes, it will.

In fact if you study history you would know that it is inevitable. No fiat currency has ever survived just as no dominant sovereign state has, in the end, ever repaid their national debt.

I would even suggest this could happen, and is even likely to happen, within the next 10 or 20 years.

Here is why:

  1. The US Dollar, when it was still backed by Gold, became the world’s primary reserve currency after World War II.
  2. In 1971, Richard Nixon closed the gold window and this precipitated a serious decline in the value of the Dollar.
  3. Nixon was able to save the Dollar by instituting the Petrodollar system that eventually stabilized it and provided a de facto commodity backing in the form of Oil. This also drastically increased global demand for Dollars and so the system was able to step in and act as an effective replacement for the previous gold standard.
  4. The power of the Petrodollar system peaked in 1985 and then began what has been a gradual decline in demand for the USD. The value of the USD bottomed out in 1992 and then began a gradual recovery into the early 2000s.
  5. In 2001–2002 more major oil exporting countries began accepting payment for oil in currencies other than USD. Further Dollar declines followed that last bottomed in 2008. Interestingly this 2001–2002 Dollar peak was right around the time the last major low in Gold occurred.
  6. Now virtually the entire system that has provided a de facto commodity backing for the USD in the form of oil is hanging by a thread, largely dependent on the continued stability of the royal family in Saudi Arabia. The Dollar has rallied from the lows it last saw during the depths of the 2007–2008 recession but it is still showing a long term pattern of lower highs and lower lows since 1985.

7. If the KSA should fall then any semblance of a commodity backing for the USD will cease to exist. And given the current fragility of the global financial and banking system in the West this will likely set off a chain reaction of events that will result in wholesale dumping of Dollars by Asia and the rest of the world for some new currency that is backed by something other than “trust”.

8. Now it is possible that a scenario could develop where if the EU’s situation worsens before any potential problems get out of hand in the KSA that you could see a further flight of liquid assets out of Europe and into the Dollar, as was seen leading up to the 1929 stock market crash, as the US would likely be perceived as a safe, or safer, haven for those assets at that time. But that will likely only set up a phase transition bubble (not dissimilar to the Tulip Mania Bubble that occurred in Holland back in the 1600s) that would also soon come crashing down.

9. But, in my considered opinion, the real key now is what happens with the KSA going forward. The decline in the effectiveness of the Petrodollar system as a support for the USD can clearly be seen since 1985. The ultimate demise of that system, which should occur if the KSA falls, should be the straw that breaks the camel’s back of the USD.


Credits:
Joseph Holleman
Quora Id: https://www.quora.com/profile/Joseph-Holleman
Image Cred: new.bitcoin.com

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