Russia is mounting an attack on the dollar and will threaten your retirement account in 2015. An attack on the dollar that results in a significant devaluation will have a major impact on your assets denominated in dollars.
As I said in my last post, France Attacks the Dollar, our mighty greenback is in trouble. I now say that Russia will be happy to push it over the cliff. Harkening back to the days of the cold war, Mr. Putin is leading the effort to replace the United States dollar as the world’s reserve currency.
First, remember the election battle between Romney and Obama. Romeny claimed Russia was the number one international threat America would face in the coming years. Obama claimed that his opponent was living in the 1980s to great applause… I guess no one is cheering now.
Here are the facts. America fined the French bank BNP Paribas nearly $9 billion for a transaction having nothing to do with the United States. Uncle Sam didn’t like the bank doing business with Sudan – who was on our naughty list, and put sanctions on this tiny nation. France and the European Union had no such laws or regulations and no formal position against Sudan.
Well, the U.S. claimed the authority to regulate BNP because the contracts that it entered in to with Sudan were in United States dollars. That’s right, the only connection to the U.S. was the currency in which the trades were in.
As you might imagine, this caused a great uproar in France and has led to a major attack on the dollar as the transactional and reserve currency of Europe.
Add to this the fact that the United States claims the right to regulate all foreign banks, including those who don’t have branches or offices in the States, that accept U.S. persons as clients, and you will see that the international community is being pushed hard by our government. At some point, enough will be enough and the dam supporting the dollar will burst.
It is important to note that the U.S.’s economic power is based on its being the reserve and transactional currency of the world. And, this status is based primarily on the petrodollar and our being the primary trading currency.
- Petrodollar refers to the requirement that the U.S. dollar be used for all oil transactions. When a Chinese buyer wants to purchase Saudi oil, they must use the USD, even if the U.S. has nothing to do with the transaction.
It’s this status as the world’s transactional currency that allows the United States to amass enormous debt while other countries pay for it through inflation. As I’ve said, this will end some day… when these nations have had enough… and it will be time to pay the debt.
In to this landscape steps a new and empowered Russia… and the attack on the dollar gets a major ally (Russia and its group of countries, the BRICS).
Like oil contracts, Russia’s natural gas sales with Europe are priced in USD. Mr. Putin is pushing hard to change to a petroruble or petroeuro… any currency but the dollar. If successful, Russia will be able to decouple all of its trade from the dollar and Europe may follow.
As you read in my last post, France is hoping to do the same… dump the dollar. And this will have a devastating affect on the demand for greenbacks. For example, removing the dollar as the transactional currency from the Russia/EU hydrocarbon market will take about $1 trillion dollars out of the market.
Regardless of what France or the European Union decide, if Russia and its group of nations effectively abandon the petrodollar, tens of trillions of dollars will be wiped from the market. Today, the USD might be riding high against the euro, but such a loss in demand, followed by a move away from the USD as the reserve currency in these countries, will cripple the dollar. It could result in a cascade of nations and large industries moving away from the dollar and the regulation (and fines) that doing business in dollars now entails.
As this point, you might be thinking I’m just crying wolf… that the USD is here to stay and there is no way to escape it. Well, I could point you to a number of examples in history where currencies and nations have fallen following a similar line of attack. But, I’ll leave that to the historians. I need only to direct your attention to the events of the last few years.
As I said above, the United States has begun to regulate ALL foreign banks that allow U.S. citizens or residents to hold accounts. These banks may not have branches or offices in America, but we claim authority over them because they do business with someone holding a blue passport.
And this regulation is based on the threat of taking away that bank’s ability to do business with corresponding partners that hold dollar facilities. Without the leverage/threat of prohibiting these foreign banks from doing business in USD, America would have no way to punish non-compliant institutions.
Many banks have responded by kicking American clients to the curb. I estimate that 90% of the foreign banks without offices in the U.S., and 75% of them who do business in the States, are now closed to Americans seeking offshore accounts.
It doesn’t take a great deal of imagination to see that these same banks could decide to give up the dollar. All they need is some support from the likes of France, Russia, and the E.U., and an alternative transactional and reserve currency.
In my opinion, we Americans should take action to protect our retirement accounts and assets against the coming times. I believe the attack on the dollar will be (partially) successful and that a significant realignment of value is on the horizon. It may not result in the annihilation of the dollar (at least, I hope it doesn’t), but it certainly will have a major impact on the value of the U.S. dollar denominated assets.
My suggestions are simple enough to implement. First, get some or all of your retirement account out of harms way by diversifying offshore. This is done by forming an LLC outside of the U.S. and investing your savings there. You will find a number of articles on this site on how to move your IRA offshore.
Next, I suggest you invest in physical gold. For thousands of years, currencies have failed while gold has stood strong. Today is no different. Please see my recent posts for more information.
I’ve written on why I believe the price of gold is artificially low and is due for an upward correction… especially against the dollar. However, today’s low price is barely a factor in my recommendation to hold physical gold. Gold will act as a hedge against any catastrophic event and can be turned in to currency or goods just about anywhere in the world.
Also, it’s legal for you to hold physical gold offshore and not report it to the IRS. That’s right, you don’t need to report gold held in a vault offshore to the U.S. government.
Those are my thoughts. I hope this article on the attack on the dollar has been helpful. Feel free to call or email us at email@example.com for additional information. Alls consultations are confidential.