Could the end of dollar dominance be nearer than many think?
Bullion.Directory precious metals analysis 18 December, 2014
By Terry Kinder
Investor, Technical Analyst
Knowing what the future will hold is always extremely difficult, but Brandon Smith outlines a pretty clear path of the steps that could result in the end of dollar dominance:
End of Dollar Dominance: Will the IMF push aside the U.S. as the dominant player in the international monetary system?
1. The International Monetary Fund (IMF) would remove veto power from the United States over IMF decisions;
2. The Chinese Yuan would be included as part of the Special Drawing Rights (SDR) at an upcoming SDR conference in October 2015.
Of course, we hear dates all the time tied to “earth shattering” events and they often come and go with nothing of significance occurring. This could be just another case of much ado about nothing.
On the other hand there is a certain confluence of events that make this end of dollar dominance event worth keeping an eye on:
1. Recent events related to Russia – sanctions, the falling Ruble – which also coincide with falling oil prices, serve as a reminder for the BRICS (Brazil, Russia, India, China, and South Africa), that the U.S. still wields tremendous influence within the international monetary system. This is something that China and Russia have been pretty vocal about as they wish to have more influence within the international monetary system;
2. China has been consistently working toward increasing use of the Renminbi (Yuan) for trade, as well as the creation of various Yuan trading hubs around the world;
3. Russia and China have been working to unload their U.S. Treasury holdings;
4. China and Russia have been building their gold reserves. Whether China intends to create a gold-backed Yuan, as some have asserted, isn’t a certainty. However, at a minimum, it seems reasonable that Russia and China are using gold to hedge their risk to U.S. Dollar exposure. Gold can also act as an alternative medium of exchange for either should the U.S. attempt to block their access to the SWIFT system.
The idea of the inclusion of the Yuan within the SDR is also something Jim Rickards has spoken about on many occassions. He seems to believe that the inclusion of the Yuan within the SDR would give China a way to become part of the global reserve currency without having to give up the tight control they have on their currency now.
The end of dollar dominance is something that has been discussed for many years. Whether or not the end of dollar dominance is near is as yet unknown. However, the steps Brandon Smith has outlined: 1) The IMF revokes the U.S. veto; and 2) The Yuan is included within the SDR are clear, and should they occur in 2015 will clearly signal the displacement of the United States from its central role within the international monetary system.
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