The United States has benefited for much of the last century by having the dollar function essentially as the global currency of choice. How did this come about? Well, at the time the world began adopting the dollar as the primary currency for international commerce (after World War II), America had a relatively stable political climate, and a national economy that was growing and capable of making it through a variety of financial and economic challenges. Plus, there was very little risk of there ever being any war on American soil.
Of course, nothing lasts forever in the world of politics or finance. There have been people predicting the downfall of the dollar for decades. In fact, you can go as far back as 1959 and find a report by a Yale professor named Robert Triffin, who published a book about gold investing (among other subjects) called Gold and the Dollar Crisis: The Future of Convertibility.
In a meeting with the congressional Joint Economic Committee, Triffin posited that the dollar would not be able to survive as the primary currency for the global reserve without taking on some rapidly compounding deficits. Triffin’s fears proved well-founded in 1971, when the United States hit a big recession, but the economy stabilized and the dollar continues to be the primary global currency of choice.
Gold and global factors
We’re in a unique global environment right now due to a wide variety of ongoing political issues. Russia and China currently have complete control of their currencies. With China, there has been a lack of transparency that tends to frustrate other countries that do business with them. After they implemented their first crude futures contracts in March, the concerns about this obtuseness have grown even more.
The term “currency manipulation” has been thrown around a lot lately with regard to what is happening with China and other global financial markets. Even President Trump has accused China in tweets of being guilty of “currency manipulation.”
Of course, currency manipulation is an extremely complicated idea and term, and such accusations are often very difficult to prove. Exchange rates tend to move relative to economic performance as well as future events that could transpire. These fluctuations are inevitable in a world that is more globally connected than ever—just about every aspect of the international economy is in constant flux, so global economic matters must be dealt with in a gentle manner.
To protect yourself against these constant ebbs and flows, you might consider putting some of your money into physical precious metals. These metals continue to be the best possible hedge against many of the economic pressures we could soon face, thanks to an unstable and tenuous political environment. Global leaders are becoming more unpredictable, and the United States cannot always be counted on to keep a cool head and be the voice of reason any more.
For more information about the idea of currency manipulation, how it could affect your investments and why gold investing can help you, contact Gold Wealth Financial today.
- by Steve Hunt
Categorised in: Gold Investing