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Retirement in a Post-Dollar World

by Lear Capital EditorialSeptember 18, 2022

Ruchir Sharma, Chair of Rockefeller International, wrote in the Financial Times that he thinks we have reached, in effect, "peak dollar." He thinks the dollar has reached its zenith of global financial power and there is nowhere for it to go but down. For several reasons, the world is looking to de-dollarize.

The main driver right now according to Sharma is sanctions against Russia and removing them from the SWIFT payments system.

“It caused a lot of concern in many other countries, from China to even India and then other countries, that something similar could happen to them as well. And they cannot be this reliant on the dollar. So one thing which is going on is that a lot of these countries are beginning to sign bilateral agreements, create smaller regional blocs where they’re able to trade and exchange currencies which are in their own sort of currencies rather than being able to transact everything to the US dollar.”

The US dollar’s status as world reserve currency affects the value of the money you’ve saved for retirement. It’s a simple matter of supply and demand. If there is less global demand for dollars, the steady supply of dollars that our Fed continually churns out will stay here at home to inflate prices at the grocery store, the gas pump and everywhere else. To turn off that spigot would require politicians in Washington to stop spending so much. How likely do you think that is to happen?

And so, these global shifts could thwart all your best laid plans if you’re not properly diversified. Are all your savings in dollars? Dollar denominated stocks and bonds? Many experts recommend a 5-20% stake of precious metals as a critical component of your portfolio.

Robert Kiyosaki especially likes gold and silver right now. 

Ruchir Sharma sees smaller regional blocs of countries coming together to form trade agreements outside of the dollar, using their own currencies. Keep an eye on the BRICS countries (Brazil, Russia, India, China and South Africa.) All of these countries have taken steps to de-dollarize, but it is a complicated dance between interests.

 
They all agree that heavy dependence on the US dollar, and thus US policies and increasingly unpredictable leaders, represents a concerning economic vulnerability for them. But they all want to preserve their own currencies at the same time.
 
Not only that, but most countries have significant portions of their central bank reserves in US dollars. Taking any action to crash the dollar all at once, would be cutting off their nose to spite their face. And some 65 countries peg their currencies to the dollar, including the Saudi riyal. No one wants a sudden dollar crash. 
 
These complications are buying the US dollar time, but how long before the Biden administration makes another colossal error (like the catastrophic and weak Afghanistan withdrawal, or the clumsy ham-fisted sanctions against Russia) that gets everyone’s attention and unifies our adversaries?
 
Right now is a great time to set or add to your position in precious metals. These issues are not top of the headlines in the mainstream news, so the price of gold doesn't reflect these concerns on a wider scale. But when and if these do become headline issues, you'll have MUCH less of an advantage if you're not already prepared financially.
 
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