USD De-dollarization

A major financial storm is approaching that will negatively impact the financial economies of the United States and Canada. For decades the USD (United States Dollar) has been the standard currency in international trade. This has enabled the US to print money and spread risk to countries that had to keep a USD reserve for trade. Unfortunately, the US has created a massive debt load they can never pay off. As a result, the USD is well on the way to losing world reserve currency status.

A good example is Saudi Arabia who would only accept USD for oil. This monopoly forced countries to purchase US treasuries in order to pay for oil purchases. Recently Saudi Arabia has changed this policy and now basically accepts any currencies that have value. In turn Saudi customers no longer have to convert their money into USD. Examples like this are why countries are drastically reducing their dependence on the USD and selling off excess US dollars.

USD De-dollarization is no longer an if. It is now a matter of how rapidly the De-dollarization will occur. Many large international agreements are no longer based on the USD. As the flow of US dollars being redeemed increases, it will force the US to print more money, creating more inflation.

US bank loans are expected to tighten further, driving interest rates even higher. More banks can be expected to fail. Foreigners are bound to become increasingly reluctant to hold dollars, which they will sell. Many US banks are having serious financial difficulties now and the De-dollarization is only going to make matters worse.

To compound matters there is another financial storm approaching that will accelerate and amplify the symptoms of USD De-dollarization. The BRICS group of nations (Brazil, Russia, India, China, South Africa and other countries) have already ditched the USD when trading with other BRIC members. In addition, they intend to create a BRIC dollar this summer, that is backed by physical gold. The gold backed BRICS dollar will be direct competition with the USD, which is backed by a printing press and a mountain load of debt that is mathematically impossible to repay.

What exactly the fallout of USD De-dollarization will be on Canada is hard to predict as we are in unchartered waters. It is just a question of how much financial damage the USD De-dollarization will have on inflation, supply chain shortages and extremely tight credit availability.

One of the first effects we can expect is a steady drop in exports to the US. Unfortunately, 73% of Canadian exports go to the US. How much of a drop is hard to predict. Interest rates are already in an upward trend. As the interest rates rise, credit will become harder to obtain. Third party loans will become more common.

Various industries will be affected by severe material shortages, as different manufacturers and distributors go out of business. Most people have no idea the USD De-dollarization is already in motion and will be blindsided when realty can no longer be ignored.