The Global Economic Shift: Is Your Portfolio Prepared?
Adrian C. Spitters, CFP?
Private Wealth Advisor | Author | Commentator | Speaker | Offering De-Risking Wealth Solutions For Affluent Business Owners, Farmers, Families & Family Estates | Contact: [email protected]
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Source Article: The Fuse Is Lit: Dollar Hegemony Ending | Andy Schectman
It Starts with Gold
Gold is the foundation of a well-diversified investment portfolio that includes income-producing private alternative assets like private equity and private real estate. These investments can help fortify and de-risk your portfolio against financial institution risk, economic threats, inflation, and higher taxes. Gold has long been considered a safe haven in times of economic uncertainty. Its stable value makes it a reliable hedge against inflation and market volatility. Gold represents security and confidence, serving as a foundation for wealth preservation. Contact New World Precious Metals to discuss your purchase options.
The Crumbling Financial Landscape
For decades, we have lived well above our means, largely due to the financial support of foreign creditors. However, this period is coming to an end, and the implications are alarming. As global economic dynamics shift, it is essential to understand the potential repercussions on our financial stability and personal wealth.
Central banks worldwide have been repatriating their gold reserves and increasing their holdings. Countries like India and Saudi Arabia are moving away from the U.S. dollar, embracing systems like Project mBridge and the unit currency, which are not compatible with it. This shift signals a diminishing role for the U.S. dollar in global trade, potentially leading to severe inflation and economic instability in the United States.
The recent trends show India has purchased more Gold in the past few months than in the last two years combined, repatriating significant amounts from the Bank of England. Similarly, Saudi Arabia, the largest oil producer globally, has become a full participant in Project mBridge. This initiative, supported by the Bank for International Settlements (BIS), along with China, Hong Kong, Thailand, and the United Arab Emirates, aims to create a cross-border payment system that bypasses the U.S. dollar. The new system allows countries to trade using their own currencies, ultimately settling transactions in a gold-backed unit currency.
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Project mBridge represents a significant shift in global financial infrastructure. By enabling cross-border payments using local currencies and central bank digital currencies, it reduces dependency on the U.S. dollar and the SWIFT system. The inclusion of Gold as a backing for the unit currency further underscores the diminishing role of the dollar. This trend is not just about economic convenience but also a strategic move to avoid the risks associated with holding large amounts of U.S. debt, especially given the increasing weaponization of the dollar in geopolitical conflicts.
The Impending Dollar Crisis
The U.S. debt has soared to unprecedented levels, with the Treasury Department reporting an increase from $33.9 trillion to $34.86 trillion within just six months. This acceleration in debt is unsustainable and poses a significant threat to the dollar's value. As countries pivot away from the dollar, the demand for U.S. Treasuries will decline, leading to higher interest rates and further economic turmoil.
The implications of this debt acceleration are profound. The U.S. economy relies heavily on the continuous flow of foreign investments and the stability of the dollar. However, as more countries join the BRICS alliance and adopt gold-backed currencies, the dollar's reserve status is under threat. This shift could trigger a massive return of dollars to the U.S., causing hyperinflation and economic instability.
Countries like China, India, and Russia have been increasing their gold reserves and reducing their holdings of U.S. Treasuries. This trend, if it continues, could lead to a situation where the U.S. is unable to finance its debt without resorting to extreme measures, such as printing more money. This, in turn, would lead to even higher inflation, eroding the purchasing power of the dollar and leading to a potential economic collapse.
The Repatriation and Accumulation of Gold
Central banks have been aggressively repatriating Gold and increasing their reserves. India, for example, has repatriated 100 metric tons of Gold from the Bank of England and has purchased 1.5 times more gold in the first four months of this year than they did in the entire previous year. Similarly, several African countries have repatriated their Gold from the New York Federal Reserve, highlighting a growing trend of nations seeking to hold their Gold within their own borders.
This repatriation is a clear sign that countries are preparing for a potential shift in the global financial system. By holding their Gold domestically, these nations are positioning themselves to have more control over their financial future. This move also reflects a lack of trust in the current global financial system, particularly the role of the U.S. dollar as the world's reserve currency.
The Rise of Project mBridge and the Unit Currency
Project mBridge, supported by the BIS, China, Hong Kong, Thailand, and the UAE, represents a significant shift in global financial infrastructure. This project aims to create a cross-border payment system that bypasses the U.S. dollar and the SWIFT system. By enabling transactions in local currencies and settling them in a gold-backed unit currency, Project mBridge reduces the reliance on the U.S. dollar and mitigates the risks associated with holding large amounts of U.S. debt.
The unit currency, as described in the project's white paper, will be backed 40% by Gold and 60% by a basket of local currencies from the BRICS nations. This setup ensures that the currency is stable and less susceptible to the fluctuations of any single currency. The involvement of major economies like China and India adds further credibility to this new system, potentially attracting more countries to join and reducing their dependence on the U.S. dollar.
Saudi Arabia's full participation in Project mBridge is particularly significant. As the world's largest oil producer, Saudi Arabia's move away from the U.S. dollar and towards a gold-backed currency could have a profound impact on the global oil market. This shift could reduce the dollar's use in global oil transactions, further diminishing its role as the world's reserve currency.
The Weaponization of the U.S. Dollar
The U.S. has increasingly used its financial system as a tool of geopolitical power. By imposing sanctions and restricting access to the dollar-denominated financial system, the U.S. has effectively weaponized its currency. This has led to a growing backlash from countries that seek to reduce their dependence on the dollar and protect themselves from potential U.S. sanctions.
The weaponization of the dollar has accelerated the push toward alternative financial systems. Countries are now more motivated than ever to find ways to conduct trade and settle transactions without using the U.S. dollar. This trend is evident in the growing number of countries joining the BRICS alliance and participating in projects like mBridge.
The Role of Gold in the New Financial System
Gold's stability and reliability make it a strong foundation for a well-diversified portfolio. Its value remains steady even in times of economic turbulence, offering protection against inflation and financial uncertainty. Given the potential vulnerabilities in the financial system, having a secure and tangible asset like Gold is paramount.
Combining Gold with investments in private real estate, such as multifamily rental apartments, can further enhance portfolio diversification. This approach not only safeguards wealth but also taps into the growing demand for rental properties driven by immigration and demographic changes. By investing in both Gold and private real estate, investors can build a robust, resilient portfolio that mitigates risks associated with financial intermediaries and systemic financial collapse.
Gold's role in the new global financial landscape is becoming increasingly evident. The BIS has reclassified Gold as a tier-one asset, giving it equal status with cash and government bonds. This reclassification underscores Gold's importance as a financial safeguard. As central banks continue to increase their gold reserves, individual investors should consider doing the same to protect their wealth.
The Impact on U.S. Treasury Bonds and the Dollar
The diminishing role of the U.S. dollar in global trade will have a significant impact on the U.S. Treasury bond market. As foreign countries reduce their holdings of U.S. Treasuries, the demand for these bonds will decline, leading to higher interest rates. This, in turn, will increase the cost of borrowing for the U.S. government, exacerbating the debt problem.
Higher interest rates will also have a ripple effect on the broader economy. The cost of borrowing for businesses and consumers will rise, leading to reduced investment and spending. This could result in a slowdown in economic growth, higher unemployment, and increased financial instability.
The potential influx of dollars returning to the U.S. as countries reduce their dollar reserves could lead to hyperinflation. As the supply of dollars increases, their value will decrease, leading to higher prices for goods and services. This scenario would erode the dollar's purchasing power, making it more difficult for individuals and businesses to afford basic necessities.
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A Partnership for Holistic Wealth Management
As a dedicated advocate for de-risking business, family and multi-generational wealth, I am partnered with one of the leading independent private wealth management firms. My team serves high-net-worth clients nationwide. We provide professional investment management and comprehensive wealth planning solutions from a fiducially focused, client-first perspective. We provide access to sophisticated tax-advantaged strategies and solutions traditionally reserved for the ultra-affluent.
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Complimentary Portfolio Evaluation
As a valued reader, I am offering a complimentary portfolio evaluation to discuss how investing in alternative assets such as private equity, private real estate, precious metals, commodities, government-sanctioned flow-through tax-efficient structures, and tax-minimizing corporate insurance solutions can help to fortify and de-risk your portfolio against financial institution risk, economic threats, inflation, and higher taxes.
To book your consultation, email me at [email protected] or use my Calendly Link. Alternatively, you can contact New World Precious Metals to discuss purchasing options for physical precious metals.
In these turbulent times, it's crucial to ensure that your portfolio is well-positioned to withstand potential economic challenges and market fluctuations. By considering the incorporation of Gold, you may be able to fortify your investments and better navigate the complexities of the current financial landscape.
The Custodial Model: An Additional Layer of Protection
In light of the revelations in David Rogers Webb's book The Great Taking, to further safeguard wealth, the firms I work with employ a custodial model, where client assets are held securely by an independent third-party custodian rather than commingled with the firm's assets. This crucial segregation of assets provides an additional layer of protection, reducing the risk of seizure or misappropriation in a financial crisis or institutional insolvency. The custodial model offers investors a safeguarded solution to help secure their wealth separately from the investment management firm.
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Exploring the U.S. for Wealth Security
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