reserve currency



Why Gold Is Undervalued

And poised to re-price upwards from here
Wednesday, October 22, 2014, 11:31 AM

Gold has been in a bear market for three years. Technical analysts are asking themselves whether they should call an end to this slump on the basis of the "triple-bottom" recently made at $1180/oz, or if they should be wary of a coming downside break beneath that level. The purpose of this article is to look at the drivers of the gold price and explain why today's market value is badly reflective of gold's true worth. » Read more



The Dollar May Remain Strong For Longer Than We Think

Why demand for it is higher than other fiat currencies
Tuesday, September 16, 2014, 9:50 PM

I have long been a dollar bull, not for any over-arching reasons based on inflation, deflation, rising geopolitical multi-polarity or any of the other issues that touch on the dollar’s valuation vis-à-vis other currencies. My analysis focuses on a few basics:  the dollar’s status as the global reserve currency, Triffin’s Paradox (a.k.a. Triffin’s Dilemma) and global capital flows into the dollar and dollar-denominated assets such as U.S. Treasury bonds. » Read more


Peak Prosperity

A Brief History of US Money - Crash Course Chapter 9

The rules get changed (a lot)
Friday, August 15, 2014, 5:29 PM

Looking at the past 100 years of the US dollar's history, one theme becomes abundantly clear: in times of crisis, the US government has no issue with changing its own rules or breaking its own laws. And those "temporary" emergency measures have a nasty habit of quickly becoming permanent. » Read more



On the Path To War

Putin plays chess, the "markets" play Tic-Tac-Toe
Monday, August 11, 2014, 6:25 PM

The US is clearly now pushing Russia towards war. But if you read the signs correctly, Russia has been preparing for exactly this outcome for many years.

Out of several reasons that US power brokers specifically -- but western power brokers more generally -- are deeply unhappy with Russia right now is that Russia is committing a cardinal sin: it is openly, brazenly calling for an end to dollar dominance and has moved aggressively with China to achieve that aim. » Read more


Skypixel |

The End of Dollar Dominance?

Loss of reserve currency no longer an idle threat
Monday, August 11, 2014, 6:24 PM

Dollar Daze

One thing that is absolutely crystal clear at this point is that Putin and Russia consider the US and its dollar hegemony to be a parasitic anachronism that no longer serves anybody besides the US.  Putin has made many direct comments to that effect and then followed them up with concrete deals struck in ways that bypass the dollar entirely.

Here's what he said back in 2011, well before any of the recent action started: » Read more


This chapter of the new Crash Course series has not yet been made available to the public.

Each week over the rest of 2014, in sequential order, a new chapter will be made publicly available (we've currently published up to Chapter 8)

If you don't want to wait, you can:



Have We Reached Peak Wall Street?

An argument its dominance is in decline
Monday, March 31, 2014, 6:14 PM

Though the mainstream financial media and the blogosphere differ radically on their forecasts—the MFM sees near-zero systemic risk while the alternative media sees a critical confluence of it—they agree on one thing: the Federal Reserve and the “too big to fail” (TBTF) Wall Street banks have their hands on the political and financial tiller of the nation, and nothing will dislodge their dominance.

But what id Wall Street’s power has peaked and is about to be challenged by forces that it has never faced before? Put another way,what if the power of Wall Street has reached a systemic extreme where a decline or reversal is inevitable? » Read more


Jim Rickards: We're Witnessing One of the Greatest Failed Experiments in Economic History

It all ends in the collapse of the dollar
Saturday, September 21, 2013, 2:50 PM

Jim Rickards, author of the best-seller Currency Wars, sees the world's central banks embroiled in a "race to debase" their currencies in order to restore – at any cost – growth to their weakened economies.

In the midst of the fight, the U.S. Federal Reserve wields oversized power due to the dollar's unique position as the global reserve currency. As a result, actions by the Fed create huge percussive ripples across the battlefield, often influencing events in ways little understood by the players – and especially by the Fed itself.

In Rickards' words, the policymakers at the Fed "think they are dialing a thermostat up and down, but they're actually playing with a nuclear reactor – and they could melt the whole thing down": » Read more


Off the Cuff: Whither the US Dollar?

A hot debate worthy of your time
Wednesday, March 27, 2013, 11:50 PM

In this week's Off the Cuff podcast, Chris and Charles Hugh Smith do something a little different.

Given the thoughtful and in-depth discussion resulting in our recent article on the future of the dollar's purchasing power, Chris and Charles engage in a fundamentals-based debate on the outlook for the U.S. dollar over the next decade.

This is one of those instances in which Charles, a valued contributing editor to Peak Prosperity, sees the future differently than Chris... » Read more


Why Gold & the Dollar May Both Rise from Here

An important possibility to consider
Tuesday, November 13, 2012, 10:05 AM

Executive Summary

  • Triffin's Paradox leads to four principal conclusions that indicate why the U.S. dollar may well continue to strengthen from here
  • Why the euro's troubles have been good for the price of gold
  • Why the dollar can strengthen despite the United States' wishes
  • Why the future may well see the price of both gold and the U.S. dollar rise

If you have not yet read Part I: Gold & the Dollar are Less Correlated then Everyone Thinks, available free to all readers, please click here to read it first.

In Part I, we examined the commonly offered correlations between the dollar, gold, interest rates, and the monetary base, and found no consistent correlations between any of these and the domestic economy.  Clearly, the trade-weighted value of the dollar and the value of gold have at best marginal impact on the domestic economy. 

Perhaps the dollar’s primary impact is on the international economy, as suggested by Triffin’s Paradox, which begins with the premise that the needs of the global trading community are different from the needs of domestic policy makers.

Prior to 1971, the dollar was backed by gold, which acted as a supra-national anchor to the dollar's reserve status.  As the U.S. monetary base expanded while gold remained artificially pegged at $35 an ounce, roughly half of America’s gold reserves were shipped overseas before the policy was jettisoned.

Here is the Wikipedia entry on Triffin’s Paradox:

The Triffin paradox is a theory that when a national currency also serves as an international reserve currency, there could be conflicts of interest between short-term domestic and long-term international economic objectives. This dilemma was first identified by Belgian-American economist Robert Triffin in the 1960s, who pointed out that the country whose currency foreign nations wish to hold (the global reserve currency) must be willing to supply the world with an extra supply of its currency to fulfill world demand for this 'reserve' currency (foreign exchange reserves) and thus cause a trade deficit. (emphasis added)

The use of a national currency (i.e. the U.S. dollar) as global reserve currency leads to a tension between national monetary policy and global monetary policy. This is reflected in fundamental imbalances in the balance of payments, specifically the current account: some goals require an overall flow of dollars out of the United States, while others require an overall flow of dollars in to the United States. Net currency inflows and outflows cannot both happen at once.

This leads to some startling conclusions that many have great difficulty accepting... » Read more