Reply to We almost (might have) lost reserve currency status

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]The U.S. dollar's days as a reserve currency were numbered from the moment the Biden Administration weaponized it by seizing Russia's dollar reserves (basically telling Russia "the dollars you have aren't any good anymore until we tell you they're good").

No sane country -- certainly not the powerful countries like China, India, Saudi Arabia, Brazil, etc., would ever count on U.S. dollars being a reserve currency after that move.

This doesn't mean the end, though. A country doesn't need to control the international reserve currency to be wealthy and successful. It's just going to be different from now on. [b]Prepare accordingly.[/b][/quote]

How?[/quote]

Buy gold. Buy bitcoin. Consider foreign stocks. Invest in things whose value isn't linked to the U.S. dollar. [/quote]

Honest question. What does one do with a gold bar?
[/quote]

More common would to be gold bullion coins, issued by the U.S. Mint (e.g., 1 once Gold Eagle). You'd buy it and hold it as a store of value; you could later sell it at a coin shop or online retailer like APMEX for whatever the value is at the time, likely more than today.

The idea is that gold generally holds its value. Today, an American Eagle 1 ounce gold coin is worth about $3,000 (a little more actually). So, to buy a used 2012 Honda Civic today for about $6,000 USD, you'd need the equivalent of two 1 ounce gold coins.

If the dollar rapidly loses value to the point where that 2012 Honda Civic costs $20,000 USD, and if (and it's an "if" because nothing is guaranteed) gold held its current value, gold would be expected to be worth around $10,000 per ounce. But in theory, you could take two gold coins, sell them for $20,000 and then go buy your Civic.

That's what you do with gold -- you hold it as a store of value, and convert it to dollars when you need to spend some of that value.[/quote]

Thanks for the explanation. I appreciate it. Follow up questions - Who is responsible for the valuation of gold? Could "they" just decide it's no longer worth X amount?  What if the entire economic climate crashes, who is going to have the money to buy the gold and how would that benefit them?[/quote]

In theory, no one is “responsible” for the valuation of gold, or more accurately, the valuation of gold is just a reflection of the worldwide demand for it. There is a finite supply of gold in the world and every advanced civilization in human history has recognized that gold is a rare, beautiful, durable (doesn’t corrode or degrade) and to some degree “useful” element and have settled on gold as a valuable thing. Nobody decided this; no government decreed that gold was valuable—it was the collective decision of millions of individuals acting in their own self-interest.

In other words, the free market determines the value of gold—the basic economic principle of supply and demand. When people want it (demand) and those wants match up against a limited supply of gold on Earth, the value of gold goes up. If for some reason more people want to sell their gold, and demand is low, the value will go down. No one knows where the price of gold will go in the next one year or ten years, but gold has a 5,000 year track record as a store of value in human civilization.

Contrast gold with the U.S. dollar (and the Euro, and the Pound, and every other currency in use right now) which are all “fiat” currencies that can be printed in unlimited quantities forever. That’s why the dollar is always losing value over time — the government just keeps printing more of it every time it wants to spend more than it collects in taxes.

Bitcoin is an attempt to create a “digital gold” that some believe will become the digital age’s version of gold. That remains to be seen but that’s the idea — a digital asset with a finite supply that can’t be printed into existence and therefore, as demand rises against the fixed supply of bitcoin, the value will go up.

Gold has a long track record of success as a store of value; bitcoin has many properties that could make it the store of value for the digital age. I hold both gold and bitcoin for these reasons. [/quote]

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