US Dollar’s Status as Global Reserve Currency on Slow Long-Term Decline, but Not Going Down in a Straight Line

An important thing to keep our eyes on these days.

By Wolf Richter for WOLF STREET.

The US dollar as dominant global reserve currency has been on a slow long-term downward trend, interrupted by upticks. And now we had an uptick, when the dollar gained share.

The share of the USD as global reserve currency rose to 59.0% in the first quarter of 2023, after having dropped to 58.6% in Q4, which had been the dollar’s lowest share since 1994, according to the IMF’s recent COFER data.

The US dollar as global reserve currency means that foreign central banks and foreign official institutions hold USD-denominated assets, such as Treasury securities, agency securities, corporate bonds, mortgage-backed securities, etc. They also hold competing foreign exchange reserves in other currencies, such as in euros (#2), and in yen (#3). But holdings in their own local currency are not foreign exchange reserves and are not included; so the Fed’s holdings of US Treasuries and MBS are not included; the ECB’s euro-denominated assets are not included, etc.

What happened in 1978 that caused the dollar’s share to collapse from 85% to 46% by 1991? After inflation exploded in the US in the late 1970s, the world lost trust in the Fed’s ability to manage inflation. Even as inflation backed off in the 1980s, it took a long time for the world to regain confidence in the dollar. When it did, the dollar’s share rebounded until the euro came along and stopped that bounce in its tracks. Since then, the euro has been the undisputed #2 global reserve currency with a share of around 20%.

In dollar terms, the holdings of USD-denominated assets at central banks other than the Fed rose to $6.58 trillion, the second quarter in a row of increases, after three quarters in a row of declines.

The other major reserve currencies.

The euro, perennially #2: Its share dipped in Q1 to 19.8%, from 20.4% in the prior quarter. The old dream of “parity” with the dollar as reserve currency has not yet come true. And at the current rate, it’s going to take a very long time and will require lots of patience.

The Japanese yen, #3: Share of 5.5%, unchanged (purple in the chart below).

The British pound, #4:  Share of 4.9%, unchanged (blue, just under the yen).

The Chinese renminbi, #5: its share has now dipped for four quarters in a row to 2.58%, the lowest since Q1 2021 (thick green line). The progress that had been expected has been waylaid by the reality of capital controls, convertibility issues, and other issues. Central banks appear to be leery of holding RMB-denominated assets. At this pace and direction, the RMB will never get close to the USD as reserve currency. China, as the second largest economy in the world, should have a larger share of global reserve currencies, but it’s just not happening.

The other currencies in the pile at the bottom: Canadian dollar (2.43%, up a hair), Australian dollar (1.98%, up a hair), and Swiss franc (0.25%, up a hair). The other currencies, each with a share even smaller than the Swiss franc’s share, have a combined share of 3.65%.

Dollar-exchange rates and foreign exchange reserves.

Foreign exchange reserves are measured in dollars. So for reporting and comparison purposes, the holdings in EUR, YEN, GBP, RMB, etc. are translated into USD figures at the exchange rate at the time. And so the exchange rate between the USD and other reserve currencies impacts the magnitude of the non-USD assets – but not of the USD-assets.

For example, Japan holds EUR-denominated assets. The value of these foreign exchange reserves is translated into USD at the EUR-USD exchange rate at the time. So the magnitude of Japan’s holdings of EUR-assets, when it’s expressed in USD, fluctuates with USD-EUR exchange rate, even if Japan’s holdings don’t change.

On a quarterly basis, the share of these holdings can fluctuate based on the exchange rate between the USD and other currencies.

But the USD exchange rates can move wildly against other individual currencies. For example, for the past 12 months, the yen has been a big mess due to the toxic mix of surging inflation and the Bank of Japan’s stubborn refusal to back off its negative policy rates and yield curve control. We just discussed this here.

Despite these fluctuations, the USD, as tracked by the Dollar Index [DXY], which is dominated by the euro and yen, is back where it was in 1999. It worked off the huge spike that peaked late last year and is now back down at the upper end of the normal range of the past two decades. So over the longer term, there is some stability between these exchange rates, though they can swing wildly in between, and they’re doing a lot of swinging right now (data via YCharts):

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  222 comments for “US Dollar’s Status as Global Reserve Currency on Slow Long-Term Decline, but Not Going Down in a Straight Line

  1. Hubberts Curve says:

    It might be sped up quite a bit if the BRIC’s gold backed currency materializes in a serious way.

    • MrMagoo says:

      USA holds 8000 tons of gold
      China 2700 tons
      Swiss 1040 tons
      Germany 3360 tons
      Russia 2350 tons

      The US Dollar is backed and trusted ?
      I would not want to hold Russian or Chinese currency.
      The US Dollar is still the “Cleanest shirt in the Dirty Laundry.”

      • SocalJimObjects says:

        The USA holding 8000 tons of gold is but a rumor. For all we know it’s all tungsten down there at Fort Knox. No one knows for sure.

        • Anthony A. says:

          Probably mostly Fool’s Gold. LOL! (and maybe more Nixon tapes)

        • SoCalBeachDude says:

          The US Treasury which owns the gold reports monthly on the exact mounts owned by the US Treasury which doesn’t add up a more than a month to three of the current US federal deficit. The US Treasury values the 8,000 or so metric tonnes of gold at the official p[rice of $42.42 per ounce which is around $11 billion. Even valued at $3,000 per ounce the total monetary valuation of the 8,000 or so metric tonnes of gold is less than $400 billion.

        • Roberto says:

          I will rather put my money on an 8000 gold RUMOR than in the 2700 other RUMOR!!!

      • Frederick says:

        8000 tons allegedly Hasn’t been independantly confirmed so I’m doubtful

        • SoCalBeachDude says:

          The amount is confirmed every month. The issue is that it isn’t worth a hill of beans.

        • rick m says:

          Frederick is correct, no independent audit of US gold. The Treasury can’t allow it, or it would have been done long ago. Revaluation of current physical gold holdings to market would involve such an audit. Since none of this gold is ever going anywhere as per The Plan, an audit is unnecessary anyway from the government’s point of view.

        • JimL says:

          SoCal : “The amount is confirmed every month. The issue is that it isn’t worth a hill of beans.”

          You just don’t realize that Obama used a Jewish Space Laser to steal all of the gold from Ft. Knox and give it to Mexican immigrants so they would help elect George Soros the secret leader of the world.

          All of this will be exposed when Putin and the CCP go on the gold standard and the dollar plunges to zero.

          ***** please note that this is sarcasm/humor. I know it can be hard to tell because no matter how crazy a person makes something up, there is a goldbug somewhere saying something crazier, except actually meaning it *****

      • Anon1970 says:

        So why did the Bank of Canada get rid of all of its gold reserves?

      • John says:

        How does anyone really know how much gold is in the US reserve?
        When was the last audit of said reserves?

      • roddy6667 says:

        How much paper money does that 8000 (alleged) tons back? That is the important question, not absolute tonnage.

        • JimL says:


          Dollars are not backed by gold. They are backed by having the ultimate taxing authority on the world largest, most dynamic economy.

      • Pat McKim says:

        Given all the other egregious lies, one would be wise to question those 8000 tons of gold. The last time gold at Ft Knox was audited was well before Auric Goldfinger tried to nuke Ft Knox in the movie Goldfinger. It was during the Eisenhower Administration. There has been too much temptation to sell or lease that gold and never get it back. Look at the Strategic Petroleum Reserve.

      • Phillip Jeffries says:

        You bet! No convertibility is a wealth expropriators dream! The top 1 percent are laughing all the way to the bank.

    • Happy1 says:

      Ha ha ha the idea of Brazil with its economic history being part of any gold backed currency is beyond laughable. You might as well talk about Argentina doing this, they are only a bit worse off with their inflation history than Brazil.

      • Apple says:

        One visit to São Paulo would clear anyone of that silly notion.

        And it make San Francisco look like the most orderly city in the world by comparison.

      • Pat McKim says:

        Not recently pal. Brazil’s Real will more than double against the USD in the coming secular commodity market. Much better returns in Brazil than in the US. Of course, I’m sure you’ve been there or invested there many times, right?

    • Bond Vigilante Wannabe says:

      Part of the problem with gold is that mining technology can cause a new flood of gold to hit the market at the right price point.

      If the world went back to the gold standard, this could happen and we would have new gold driven inflation.

      Take a look at the history of the Pricing Revolution when the Spanish brought back gold from Latin American in the 1500s.

      Unfortunately there doesn’t appear to be a way to escape this, only to moderate its effect.

      • DM says:

        How’s a flood of gold any different than the Fed “flooding” the system and increasing the money supply by 40% in two years during the pandemic?

        Gold has grown at 2% per annum for decades. I doubt we’ll ever see gold production go up 40% ever. Unless maybe an gold asteroid hits earth.

        • perpetual perp says:

          You don’t want to pay taxes. What else are they going to do? Deadbeat citizens united!

        • Brian says:

          The Fed created debt on their “balance sheet” at the same time so also has the ability to decrease the money supply. Gold, once produced, is permanent. (Unless you irradiate Fort Knox to remove it from “supply” :-)

          QE and QT would not be possible with gold. Those are both valuable tools regardless of whether you think they’ve been used properly or not.

        • Cas127 says:

          “What else are they going to do?”

          Stop buying votes with stolen money.

          People would have more faith in the tax system if the spending system was less of a sh*thole.

      • Rohry says:

        The real problem was the amount of silver that they brought back. That has been identified as a main cause of inflation in the 16th and 17th century.

      • G P says:

        What mining technology? I’ve been following mining for some time and haven’t heard of any new teck.

        • phusg says:

          Deep sea mining technology is supposedly ready and awaiting regulatory approval, but that isn’t expected to be producing gold. Mining asteroids or the core of the Earth is still very much science fiction.

      • Shawn says:

        Interesting point, now compare that to what the dollar is worth today to what it was worth 50 years ago.

    • Dorey says:

      A gold backing would be the quickest way to make sure a multinational BRICS currency be DOA in any serious way.
      Any response to any economic shock would be severely restricted by material conditions that they have no control over, and would give each country’s elites an easy opportunity to cause a central bank run.

      Which now it actually makes sense, why some people would be promoting this is idea.

      • Bobber says:

        If the leaders wanted to stabilize the money supply, why would they go through the hassle of implementing a gold standard when they could simply pass a balanced budget amendment, set a 0% inflation target, or restrict the Fed’s power to temporary emergency lending to strong solvent banks? These latter steps would be a lot more effective and less controversial.

      • AK says:

        Wasn’t USD a gold backed currency until 1973 ? United States had managed to reach a superpower status with this gold-backed USD. After USD became (temporarily, per President Nixon’s speech) a pure fiat currency, how did United States do economically ? Could we say that USA had prospered in these 50 years ?

        • JM says:

          Prospered due to trillions in new debt. Take out the debt and gdp goes negative.

        • Anon1970 says:

          The US closed its gold window on August 15, 1971. European central banks (especially France) had lost confidence in the dollar and were turning in their surplus dollars for gold at the fixed exchange rate of $35 per ounce.

    • JimL says:

      The BRICs are Brazil, Russia, India, and China. Some other countries might include South Africa or Mexico.

      None of those countries are known for having the most stable economies. In fact, most of them have had major issues of various sorts many times in the past couple of decades.

      Probably the most stable economy out of all of them is China. If you want to put your trust in the Chinese Communist Party, that has a long history of currency manipulation and state run everything, go ahead.

      If you think that somehow backing the currency with gold will somehow magically make it better, go buy a bridge in Brooklyn.

      Right now, all of the west would love it if the Russian ruble was backed by gold. Banks, market makers, and currency traders can greatly influence the price of gold. Imagine what a nation state could do. If The Russian Ruble was tied to the price of gold, I am fairly sure there would be an effort by western countries to devastate the price of gold in order to hurt the Russian economy as a way of helping Ukraine.

      No major economy is ever going back to the gold standard. Not going to happen. Too many advances in monetary policy. The world has moved on.

      Crazy talk.

    • Sanjiv Brahmbhatt says:

      US dollar is still 50 % overvalued. If you want to maintain as global currency then interest rate must be 10%.

    • Vincent Terranova says:

      It’s not a gold back currency. It’s a trade unit intended for trade settlement between nations.
      A gold backed currency would suggest that you and I could redeem that currency for gold

  2. Leo says:

    The good here is that all developed world currencies suffer from same or bigger problems. So when comparing one Fiat to another dollar remains king despite all the inflation.

    Sure dollar will keep losing to oil, wheat, copper and gold, but so will other currencies and dollar remains the cleanest dirty shirt.

    Dollar is provided political stability by an unchallenged empire of 10 career battle groups that can control most global trade when desired.

    • Einhal says:

      Exactly. Between American ingenuity, our political stability and our unified national climate, Americans have a birthright to an ever-increasing standard of living, and the rest of the world is forever morally and legally obligated to provide their resources for our dollars. There’s a reason why our economy is so productive. I mean, look at all of the Instagram influencers!

    • Thomas Curtis says:

      Yes! Dollar will remain strong as long as we pay our bills and remain strong.

  3. Art de Eco says:

    USD as reserve currency might decline faster from now on. National Currencies will play bigger role in international trade going forward, even before a BRICS currency is created and made operational. The BRICS bank was created in 2014 but there was no urgency to dedollarize until the USA weaponized SWIFT and scared the countries that hold USD as reserve. It is up to the USA to think what it can do to speed up or delay the creation of BRICS currency.

    • Wolf Richter says:

      There won’t be a “BRICS currency.” That’s just some hocus-pocus clickbait BS that someone fabricated for silly-buttons to relish and spread.

      • Perthgoldenboy says:

        Sure, there won’t…maybe it will be called something else, but there will be an alternative type of exchange to use when trading and settling accounts between the countries that make it.

        And the only reason that the Euro is number two is because all the other national currencies that existed prior to those joining the Euro block were done away with.

        Kind of magic and illusion.

        And as far as the entire basis of the article IMO and the report that it based upon including the definitions is just BS.

        Total CB assets should be looked at rather than just looking at a slice of those assets to get the real data.

        • Wolf Richter says:

          You people need to get out more internationally. Businesses buy and sell cross-border all the time and SETTLE IN LOCAL CURRENCY, and have forever.

          What is this idiocy about the dollar? When a company in the UK buys something from a company in Germany, they’re NOT paying in USD, but either in euros or in GBP. When a company in Russia buys something from a company in Germany, they pay in euros, not in dollars. Companies in China doing business with companies in Russia will work a deal that specifies the currency in the pricing. They use local currency just fine.

          A company in a country that destroyed its own currency, such as Argentina whose currency no one wants to take, may have to use a foreign currency to buy from international suppliers, and that may be any foreign currency that both companies agree to, and that the buyer has access to. That’s where the dollar comes in handy, because it’s everywhere. But it can and often is the euro or some other major currency, such the RMB in parts of Asia, etc.

          There are currency unions and similar schemes in the world that make cross-border trading a lot easier, such as the CFA franc of eight countries in West Africa that are part of the West African Economic and Monetary Union. The CFA was linked to the French franc and is now linked to the euro.

          Companies in China can pay in dollars internationally because they have a ton of dollars from their exports to the US (they can also pay in euros and other currencies). Mexico and other countries that export a lot are the same way — they get dollars from their exports to the US and can pay in dollars.

      • JM says:

        There won’t be a BRIC’s currency? You need to keep up with the news. BRIC’s currency is a foregone conclusion, it’s already here.

        • Wolf Richter says:

          The 20,000 or so cryptocurrencies are not currencies either. Just because you call something a currency doesn’t make it one. Currencies have to be accepted and used broadly as currencies in order to be a currency.

      • Art de Eco says:

        Please shrug off this denial.
        Dedollarization looks inevitable. It is slowly but surely progressing.
        And, I do not see how Dedollarization is contingent upon creation of BRICS currency. The international trade and the world economy has flourished for thousands of years without USD. The sooner the FED and the USA accept this, the more time they will have to catch up with the new economic reality.

        • Wolf Richter says:

          Where does this bullshit come from that the entire world trades in dollars. That just total BS.

          The top two trading currencies are the euro and the dollar in about equal measure.

          So I’ll just repeat here what I said above:

          You people need to get out more internationally. Businesses buy and sell cross-border all the time and SETTLE IN LOCAL CURRENCY, and have forever.

          What is this idiocy about the dollar? When a company in the UK buys something from a company in Germany, they’re NOT paying in USD, but either in euros or in GBP. When a company in Russia buys something from a company in Germany, they pay in euros, not in dollars. Companies in China doing business with companies in Russia will work a deal that specifies the currency in the pricing. They use local currency just fine.

          A company in a country that destroyed its own currency, such as Argentina whose currency no one wants to take, may have to use a foreign currency to buy from international suppliers, and that may be any foreign currency that both companies agree to, and that the buyer has access to. That’s where the dollar comes in handy, because it’s everywhere. But it can and often is the euro or some other major currency, such the RMB in parts of Asia, etc.

          There are currency unions and similar schemes in the world that make cross-border trading a lot easier, such as the CFA franc of eight countries in West Africa that are part of the West African Economic and Monetary Union. The CFA was linked to the French franc and is now linked to the euro.

          Companies in China can pay in dollars internationally because they have a ton of dollars from their exports to the US (they can also pay in euros and other currencies). Mexico and other countries that export a lot are the same way — they get dollars from their exports to the US and can pay in dollars.

    • AK says:

      Personally I doubt that “BRICS currency” will arrive in the near (or even medium term) future, but I share you belief that national currencies will play accelerating role in the international trade, for the reasons you listed. Poor USD has been abused by successive US administrations so badly and for so long that it would be unwise for responsible government of a country outside of the sphere of direct US control to ignore this fact, and not to prepare a functional plan B.

  4. James Pelton says:

    I keep reading that big governments like China and India are buying gold by the boatload. What does that mean?

    • Wolf Richter says:

      “What does that mean?”

      I means you fell for a bunch of clickbait.

      • JM says:

        Central banks report their purchases. Are you thinking no gold is being purchased and it’s all hype? Come on man, even you are smarter than that.

        • Wolf Richter says:

          “by the boatload.”

        • BeeKeeper says:

          Think about it this way. Which countries are increasing assets in gold? When you see the list of those countries, can you see the pattern? Are those countries trying to protect their local currency? Are they expecting something nefarious to happen to their currency? So they protect themselves with gold? Gold is asset mainly for protection against DOWNSIDE. Who tries to protect themselves from downside most? CRITICALY THINK for yourself, ignore narratives!

    • Flea says:

      Miners need to sell gold copper,silver to get rare earth materials,so just another globally fabricated LIE .there’s no shortage of silver ,like gold it’s being hoarded by private citizens = who as usual will be left holding the bag . Knee it was a scam when blackrock invested $173 million in Pslv. Typical pump and dump

      • vincent terranova says:

        Blackrock invested in PSLV so they are in a position to redeem those shares for physical.
        So there’s that
        I agree that PSLV is not what folks have been led to believe. It’s paper silver unless you hold a ton of shares and have deep pockets. Like Blackrock

    • Bond Vigilante Wannabe says:

      A lot of this nonsense is gold investment promotion schemes.

      Keep this in mind– if gold actually became important as a reserve currency, then you would need to worry about advances in mining technology causing a flood of new gold at certain price points.

      This is the central problem with the gold investment thesis– if it really hits, then new supply will come into the market and you have a different problem.

      Because this is impossible to predict what technology could be developed/deployed at what price points, you might not even get paid if you are right with your underlying thesis.

      Gold only really “works” as an investment in negative real yield environments, and then you still need to keep an eye on carrying costs.

  5. MrMagoo says:

    The USA wants and needs to hold on the “World Reserve Currency.”
    The Feds will keep rates higher than most believe possible.
    Got to inflation under control, or at least better than the rest of the world.

    When the next Financial Crises comes, it always does.
    Most will turn to the US Dollar for safety.
    The US Dollar rally like a home-sick angel.

    Fifteen years ago, 2007 Banking and Housing Crises.
    If you believe in cycles, we are due for another market melt down ?

    Will profits from AI save the markets? maybe, maybe not.
    Will a return to ZERO Rates save the markets ? Worked last time.

    How many times can the CAN BE KICKED DOWN THE ROAD ?

    For now the US Dollar is still King.

  6. Illumined says:

    I wonder how long until the $1 trillion a year deficits and the growing interest payment death spiral catches up with the dollar. Certainly being the world’s reserve currency has allowed this situation to go on for far longer than it should have, but how much longer can it last?

  7. Loren LeRoy Batchelor says:

    Russia is coming out with a gold backed currency.!

    • Wolf Richter says:

      LOL. Russia’s currency is worse than toilet paper. So toilet paper backed by gold??? You gotta be kidding. You people keep falling this BS.

      • Shawn says:

        Yes, and last year the US tried everything to destroy that toilet paper with sanctions all of which fail epically. Lol.

        • JimL says:

          LOL indeed if you think the U.S. has failed. The sanctions have only just started to hit the Russian economy. It is only going to get worse.

          You are declaring a pitcher a stud because he got the 1st out of a baseball game. There is a long way to go. Many of the sanctions won’t be truly felt for years.

          In 5 years Russia is going to be making some very tough decisions. Should they use the computer chips they obtained on the black market to upgrade their ICBMs or should they use them to build a computer to search for more oil? Tough decisions when they are cut off from everything.

        • Wolf Richter says:


          None of them failed. Russia is paying a massive price for Putin’s idiocy and land-grab greed.

          And that toilet paper keeps getting shittier. It’s now at 90 rubles to the USD, up from 70 before Putin’s invasion of Ukraine, and up from 30 rubles to the USD before Putin’s first invasion of Ukraine in 2014. Look at a chart!

          This is against the USD, which you hope is collapsing, LOL

    • rojogrande says:

      What does “gold backed” even mean? If a currency is actually backed by gold it needs to be convertible on demand for physical gold at a set ratio. If it isn’t, I think saying it is “gold backed” is merely a device meant to deceive the gullible into believing Russia now has a sound currency. I’m not just picking on Russia though, the same logic applies to any currency touted as “gold backed.”

  8. Happy1 says:

    The US simply has to get Federal spending under control. This ridiculous increase from the pandemic must be wound back. Entitlements must be addressed. I don’t know when it will not be sustainable but it is getting closer every day.

  9. James says:

    It would be useful to see a 20 year graph of the different Central Bank gold holdings.

    As for the thought of any Chinese, Russian or Brics country combining to form some form of gold backed currency is just dream talk. If few want to hold their currencies, as your graph so clearly illustrates, who would trust any so called shared gold currency? An illusion.

    Any gold currency would have to emerge from private enterprise.

    • Wolf Richter says:

      Gold is not “foreign exchange” and can therefore never serve as “foreign exchange reserves” and has no impact on the status of reserve currencies and is therefore irrelevant for the discussion of global reserve currencies.

      • khowdung Flunghi says:

        Serious question, no snark –

        Do any government entities hold crypto in whatever form as part of their “foreign exchange reserves”?

        • Wolf Richter says:

          Cryptos by definition are NOT a “foreign exchange reserves.” Foreign exchange reserves, by definition, are assets in the currency of another country.

  10. Ken C says:

    Something along the lines of this chart and “dollar’s slow decline” pops up on twitter regularly. Technically accurate, there’s no disputing that, but I’m unconvinced that one can glean actionable information from the trend. It’s in the same place it was in ~1980, around a decade before Tiananmen Square or anyone had the slightest idea whether China’s economy would go parabolic like it did, or whether they would faceplant like China is historically prone to do. Euro fixed at #2, true dat, except that I spent the better part of 2010 reading hot-takes that the whole Euro edifice was going to implode (and no one would have been particularly surprised if it did). Somewhere in between Bruce Willis was crawling through the ductwork in Nakatomi Plaza over the Christmas holidays and everyone in business school was learning Japanese.

    Not a criticism, good article as always. But if USD is on a “slow decline” because it has a lower share than during the height of the cold war with the Soviets, you can probably do another “slow decline” article in 2050 and be correct too. What will the share be in 2050? Pfft. You tell me.

    • Wolf Richter says:

      “I’m unconvinced that one can glean actionable information from the trend.”

      yes you can. It crushes the dollar-collapse crowd and the BRICS-currency silly-buttons that are trying to lead you astray. It tells you that the fearmongering about the dollar is BS, that you don’t need to react to the fearmongering, that you can keep a cool head, understand the threat of inflation, and make your decisions based on that.

      • Juliab says:

        Such nonsense about a new reserve currency and BRICS comes out all the time. In my opinion, this is Russian organized disinformation.
        The ruble is at the bottom.
        There are many Russophiles in Eastern Europe who believe this nonsense and spread it.
        I don’t think there is a normal person who would exchange their savings in euros or dollars for rubles or yuan or whatever.

        • Realist says:

          Eastern europeans usually have a healthy, experience based view of Mordor and what it represents.

          Russophiles are found in the West and often they are found among certain people with fringe views on both the left and right. In my country, the loudest russophiles are fullblooded Quislings peddling Mordor’s interests. Enough with politics for now, let’s try to keep the blog still great. Most people on the blog has no idea of living with Ruskij Mir on the other side of the border. My grandfarher and father fought for our freedom, I hope I will not have to do the same thing.

        • Wolf Richter says:

          Yes, this BS about the “BRICS gold-backed currency” came out on RT sites in the US. RT is part of the state-owned Russian propaganda machine. And a bunch of websites in the US picked it up and spread it. It was propaganda BS, and our silly-buttons love it. The bigger the BS, the more silly-buttons love it and spread it.

        • Root Farmer says:


          Rather than adding like/dislike or hide/show buttons as many of us commenters have suggested, maybe add ‘silly’ and ‘rtgdfa’ buttons for comments. Only half serious.

      • Bond Vigilante Wannabe says:


        Very well said. Given the number of comments on this site about gold or gold backed currencies, I think it would be important to educate the younger/more naive readers on how technological innovations in mining can cause a flood of gold to hit the market at certain price points.

        If the gold bugs are correct, then the gold price will rise substantially. However, mining technology has innovations which will cause them to obtain more gold profitably at much higher prices, which will cause a flood of supply at higher prices.

        This is where these scenarios about gold taking off become problematic– the bull case never talks about new supply coming online at a much higher rate because most of them don’t actually understand the newer technology and what price points this could be deployed at.

        Even if the gold bugs are right, they will still be bag holders for the miners.

        • old school says:

          I think its about $1400/ ounce for Barrick to get an ounce of gold out of the ground. I think they probably know all the ways to extract gold that there is. Its a mature industry with incremental improvements. What possible technological innovation is going to change the game? I think they are already extracting millions of ounces per year.

        • Bond Vigilante Wannabe says:

          Old School,

          The newer technologies include ocean floor mining, better cold weather mining (could be used in parts of Canada, Alaska, Antarctica, etc.), better boring technology for deeper access, 3D imaging for finding untapped deposits, etc. AI could also find additional ways of approaching things that no one has thought about.

          The key issue is that there is a price point at which gold extraction becomes viable in even completely off the wall situations.

          If you are investing in gold, you need to know what those price points are and know that there may be other technologies out there that you don’t know about (or haven’t been invented yet).

          Same could have been said for fracking– no one knew it would work until it worked, and then it opened up possibilities for a much lower break even point.

          Don’t put a bunch of money into gold unless you understand these mechanics, and are comfortable with the supply that may come online at certain price points.

          Gold is pitched as some ultimate safe haven investment– it is much safer and lower volatility than a lot of other options, but it still has intrinsic risk, and the bull case tossed around is problematic.

        • Ltlftc says:

          Nobody worth listening to believes gold will 1,000x in value, the issue is fiat losing 1,000x in value.

  11. Uncle Bob says:

    Why the need for a reserve currency anyway? It’s main function appears to be to allow nations to manipulate their exchange rates for trade purposes.

    And using the USD as a reserve asset (typically TSYs) means allowing the US to continue with ever-increasing USG debt and US trade deficit (the “exorbitant privilege”), neither of which will ever be paid off. Not much of a reserve asset if you ask me. And don’t even mention confiscation.

    Gold bullion is simply the best tradable wealth asset there is. It’s price needs to float freely, which will happen once the LBMA and its paper-gold regime collapse. The LBMA has been running on fumes for ages now. Such gold bullion will simply sit quietly in the CB’s vault doing nothing except being there.

    Nations’ FX rates will need to be truly free-floating and will be determined by sensible metrics such as trade figures, calibre of governance, and size and quality of wealth assets.

    Currencies will NOT be backed by gold! (Gold is neither money, nor currency, nor an investment, nor insurance. It is simply pure tradable wealth).

    If the USD shits itself (so you think it will never happen, eh?!) then many big players (CBs, Big Oil etc) will be screwed over. They will promptly be made good (recapitalised) by a massive one-off revaluation of all that physical gold they are frantically accumulating at present.

    As for the USG’s large stockpile – much of it was essentially stolen in 1971. Nobody will trust the US again.

    Another empire is reaching the end of its timeline. So be it.

    • Apple says:

      Going to the store and handing the clerk some gold coins seems rather quaint.

      • longstreet says:

        Physical gold must be assayed to gauge its authenticity and content.
        That’s a big problem for it being a means of exchange or even a store of value.
        Currency backed by gold is only attractive due to the limitation of currency supply based on some formula….which can be changed.
        There never will be some “window” you can walk up to and exchange your paper for physical gold. So its back to faith in the system.

        • Rohry says:

          NEVER? There used to be a “window” that you could exchange your notes for gold…

        • drodyssey says:

          Where I bank in Switzerland has a “window” for precious metal / currency exchange. It is normal here. Deposit boxes in the vault for storage. The metals are also accepted by the banks as collateral for loans.

        • Ross Craig says:

          You can buy and sell physical gold and silver at your Toronto Dominion Bank. I do.

        • rick m says:

          It’s not difficult to verify common-date pre-’33 gold US coins. In less than Mint State grades they are seldom counterfeited and sell for reasonable premiums over spot. A micrometer and scale of decent quality, the Red Book, and a 7x Hastings Triplet loupe is all that’s required. The most important thing is a reliable, trustworthy coin dealer. Every coin I buy is returnable but it’s never been necessary. Vintage numismatic coins and even some newer issues are showing nice gains in the past several years.

      • 2banana says:

        And, yet, for thousands of years and for 99% of the history of organized civilization…

        That is exactly how commerce was conducted.

        Except for the few short experiments with versions of fiat…which always ended in disaster.

        “Going to the store and handing the clerk some gold coins seems rather quaint.”

        • Wolf Richter says:

          Time moves on. We have flushable toilets now, while for 99%+ of human history, they did it some other way.

        • Harvey Mushman says:

          @Wolf Richter,

          Speaking of flushable toilets. In Southern California water is scarce. The company where I work installed waterless urinals. If those things aren’t maintained daily, they don’t smell so good!

        • Steve says:

          “Venezuelans break off flakes of gold to pay for meals, haircuts”. Seems to me we are one or two events away from a Venezuela like economy if we go chaos or civil war or something that makes our debt matter(in effect being called due equivalent). Never say never. Sayings like pride before a fall and see how the mighty have fallen were not just fairytale sayings made up for amusement. One thing about the future – it rarely responds to predictions. So hedging and contrarianism is born. If fiat goes worthless, Gold flakes anyone?

      • GrassRanger says:

        “Going to the store and handing the clerk some gold coins seems rather quaint” because nobody ever did that.

        • Old Ghost says:

          Grassranger must not be a numismatist. There are many well circulated gold coins out there (and not just USA gold coins). At one time gold coins did circulate, and some of the ones I have seen were in a lot of different pockets..

          Gold may not be money or a reserve currency. But it is an asset, just like a home or other real estate.

          Just my 2¢ to this discussion.

        • Ltlftc says:

          Sarcasm is difficult to detect on the internet.

    • Ltlftc says:

      Gold is too scarce as a commodity for everyday purchases. Silver maybe, with larger copper “change”. Wishful thinking on my part though, the reality is a bit different. Everyone wants to give up security for convenience.

      • 91B20 1stCav (AUS) says:

        …if commerce were returned to only metals exchange, would it soon be followed by a return of the clippers and alchemists, at which point would there probably be an outcry for government to assure the assumed purity of the metals (…hm, just like asking for the same ‘purity’ of our current ‘convenient’ digital/paper-exchange…)?

        Roll that rock, Sisyphus…

        may we all find a better day.

        • Ltlftc says:

          But if I lose weight, won’t I just eat and gain again? Better to just stay fat.

        • 91B20 1stCav (AUS) says:

          L – looks like you’ve hit on a source of our national physical/fiscal health issues!

          may we all find a better day.

    • bruce says:

      What else is China going to do with all the USD?? It’s not like they want to purchase a lot of products from the US besides the food they cant produce themselves. The $$$ really has nowhere else to go except treasuries

      • Wolf Richter says:

        China uses its USD to buy energy imports and other commodities imports, components, specialty equipment, etc. German manufacturers that supply China are happy to get paid in USD. Russia will happily take USD for its exports to China of energy products, timber, lumber, metals, etc. Everyone will take China’s USD. But since China imports by value a lot less than it exports, there is only limited use for its USD to pay for imports, and the rest goes into assets, such as US bonds of all kinds, US companies, US real estate, farmland, etc.

  12. James says:

    The following exchange occurred on December 18, 1912 when J.P. Morgan – the most influential American financier and banker of his time – was called to testify before Congress.

    Mr Untermyer:
    I want to ask you a few questions bearing on the subject that you have touched upon this morning, as to the control of money. The control of credit involves a control of money, does it not?

    Mr Morgan:
    A control of credit? No.

    Mr Untermyer:
    But the basis of banking is credit, is it not?

    Mr Morgan:
    Not always. That [credit] is an evidence of banking, but it [credit] is not the money itself. Money is gold, and nothing else.

    • Tyson Bryan says:

      The KWH may still be viewed as the ultimate unit of currency. This electro-energy is the currency and medium in which the BRICS are presuming to trade with one another. Russia: oil. China Solar. Etc etc.

    • Wolf Richter says:


      Keep repeating that BS from 110 years ago — a lot of horrible BS was put out there at the time and later — and sooner or later you’ll believe it yourself.

      • NotDeadYet says:

        Some years ago, I read Carnegie’s biography. I may be wrong, but if memory serves me correct, when JPM bought out Carnegie Steel, he did it with financial instruments backed by the US Dollar… no gold was involved.

      • Occam says:

        Social welfare states and aspiring empires require fully elastic currencies (i.e., fiat) to function. A gold or other metallic standard will never be used voluntarily by modern governments to restrict their emissions of currency. Even desperate nations with worthless currencies don’t look at gold. However, the weaponization of the US dollar and seizure of national assets by the US has made many countries nervous about dependence on the dollar, and so some form of scrip backed by gold (or something else) used solely to settle international trade obligations might be initiated to beta-test the waters for dollar alternatives among like-minded countries. The West has been dominant for so long that it believes it is indispensable, and acts like it. As Charles DeGaulle once said, “the cemeteries are full of indispensable people.”

    • Steve says:

      and gold is a tier one asset for central banks. I wonder why? fact check: the ark of the covenant was covered in gold. I want to know who actually gave that order and why?

  13. Sand Dunes says:

    Lurker coming in for bit because I keep on hearing the
    same thing over and over and over again.

    Man, Wolf, you got the BRICS+ bros, the cult of the
    collapse of US dollar hegemony acolytes, Gold ‘n Guns
    Peter Schiff, Cancel all debts Jubilee Michael Hudson, end of empire Ray Dalio, and even some of that grifter Rich Dad, Poor Dad Robert Kiyosaki echoing around.

    Like freaking crabs in a bucket pulling you down.
    Nobody kicks a dead dog, so you must pissing off some
    folks and their world views. If folks actually achieved
    their goals, especially their balance sheet goals, there
    would be much less squawking. Yes, whip it out and
    measure it, baby!

    Here is one of my fav quotes:

    “I must not fear. Fear is the mind-killer. Fear is the little-death that brings total obliteration. I will face my fear. I will permit it to pass over me and through me. And when it has gone past I will turn the inner eye to see its path. Where the fear has gone there will be nothing. Only I will remain.”

    – Frank Herbert, Dune

  14. Franz Beckenbauer says:

    Here’s the data for the world reserve currency Wolf conveniently always forgets:

    Central bank demand for Gold makes a record-breaking start to 2023.
    Central bank demand for Gold hit 228t in Q1, 34% higher than the previous Q1 record, set in 2013
    This follows the record annual demand of 1,078t in 2022

    Top buyers: Singapore, China, India and Turkyie.

    Must be that Harry Potter (” do Not Mention his name !”) Thing.

    • Wolf Richter says:

      LOL. How many times do I hafta repeat it?

      Gold is not “foreign exchange” and can therefore never serve as “foreign exchange reserves” and has no impact on the status of reserve currencies and is therefore irrelevant for the discussion of global reserve currencies.

    • SoCalBeachDude says:

      The total amount of gold owned by all central banks is only around 35 metric tonnes and that amount has not changed much at all in the past quarter of a century and is essential nothing other than vault decoration and absolutely nothing else.

      • Occam says:

        Gold is a central bank reserve asset; I don’t recall which tier (maybe tier two). It isn’t a “foreign exchange asset” but it’s much more than vault decoration.

        • Franz Beckenbauer says:

          It is Tier 1. Actually, the only tier 1 asset apart from US treasuries.

  15. eg says:

    I don’t believe that the Euro will ever achieve parity with $USD where international reserves are concerned — the region is too fissiparous and the entity is riven with contradictions. The Ukraine crisis has only begun to spawn monsters over there.

    China doesn’t want its currency to become a widely held reserve asset because it requires them to loosen capital controls and run trade deficits, both situations anathema to the current regime.

    The US will remain the only game in town for a good while yet. Such is the burden of empire.

  16. JW says:

    What percentage of the USD holdings in CBs relates to trade in physical objects and how much to financial transactions including derivatives?
    I have a feeling that it wouldn’t be that difficult for the BRICS or any other grouping to engineer a ‘currency’ that dealt with bilateral trades. Of course there would need to be a certain amount of liquidity, but surely nothing like the current situation that really is one covering ‘bets’.

    • Bellerian says:

      Billateral trade isn’t that much of a solution, unless the economies in the trade where full complementary and the terms of trade are neutral.

      Latin america has a scheme called CCR, used to mitigate the need for USD. Each pair of countries offset each other exports and imports, paying just the net value, thus mitigating the need and turnover of each member’s dollar reserves.

      The problems arise because that is, in pactice, a loan made from one central bank to another, where the central bank foots the credit risk of the other country’s exports. And because no two economies are fully complementary, you always get exposure. For example, Brazil exported much more to Venezuela then imports from it, and thus when Venezuela got in trouble it defaulted on it’s debt.

  17. polistra says:

    It would be interesting to ask the counterparty question. Who has the world’s reserve PRODUCTS? The world’s reserve LABOR and reserve ENGINEERING and DESIGNING and SCIENTIFIC skills?


    Production is the measure of national strength. Financial transactions are the RECIPROCAL of national strength. When the Dow goes up the real economy goes down.

    • Micheal Engel says:

      Polistra, US import from Mexico exceeded import from China.

    • Wolf Richter says:

      The US is the second-largest manufacturing country in the world, far ahead of Japan, Germany, South Korea, etc. So it’s not like nothing is produced anymore in the US. But it’s behind China, when it should not be.

      • Swamp Creature says:

        When we have to buy birdfood from China I think all is lost here in the USA. I saw a Made in China label on some of the cheap packages I recently purchased. Birdfood is crap that is leftover from a 5 step process and is supposedly not fit for human consumption. The way grocery prices are going here I think you may start to see a run on bird food in the places that sell it.

      • Steve says:

        who holds the worlds reserve products? good question but there is an asteisk*..who holds the worlds QUALITY mfg products. Chinas tools dont last. Mostly all China manufactures is junk. What weapons would you trust in a long high use war? So Chinas mfg reign has a serious *

      • Shawn says:

        China’s contributes almost twice as much to the world’s manufacturing economy than the US. And now China has a cheap and convenient place to buy all its commodities. I don’t think anyone saw that coming.

        • Wolf Richter says:

          1. “Almost twice” is a stretch. Note that the US contribution is larger than that of Japan, Germany, and India COMBINED.

          Contribution by the top ten manufacturing countries to the global manufacturing economy.

          China – 28.4%
          United States – 16.6%
          Japan – 7.2%
          Germany – 5.8%
          India – 3.3%
          South Korea – 3.0%
          Italy – 2.3%
          France – 1.9%
          United Kingdom – 1.8%
          Mexico – 1.5%

          2. China has been buying commodities from Russia for decades, including some natural gas starting in 2019, when the pipeline became operational. You didn’t know that??? But purchases of natural gas and crude oil are limited to pipeline location and capacity. And the gas Russia used to sell to Europe cannot be piped to China, and no one can buy it. It’s shut in. Russia can just eat it. And no euro moolah.

    • grimp says:

      The expensive high quality reliable stuff is not designed or engineered in China, at least not yet. There is a lot of that going on in the USA, Europe, etc. When is the last time you got on a China designed and built airliner? Even the Air China fleet consists of a few hundred Boeing and Airbus. They have introduced a Chinese regional jet to much hoopla but even it uses dependable GE CF-34 turbofan engines and American avionics. When you really need that high end engineered reliability it’s the USA and Europe, at least for now.

      • 91B20 1stCav (AUS) says:

        grimp – good illustration of the practical/cultural effects of the contemporary race between the existence/perception/true cost of quality/reliable goods and their acquisition/dilution/cannibalization by the forces of financialization (the clippers and their customers are where you find them, and I don’t mean sailing ships or b-ball…).

        may we all find a better day.

  18. Ole C G Olesen says:

    8000 Tons = 8,000.000 Kg = USA Gold holdings ALLEEGED ! .. ALLEEGED !
    At current Goldprice 63.000 USD / kg this amounts to approx 500 Billion USD
    US National Debt is 32,5 Trillion USD
    This means the USA Goldholding can pay 1 / 65 part of US National Debt
    1/65 part is equal to 1.54 % of the total US Debt — not impressive at all !
    Rather a CATASTROPHY !
    Additionally the USA does not hold signifficant amounts of Foreign Currencies .. in fact … almost NOTHING

  19. Ole CG Olesen says:


  20. DownFed says:

    The late Sam Zell said earlier this year that reserve currency status would end when other countries don’t buy our debt.

    Japan is in this situation. They want 0.5% on their debt, yet inflation runs at 3%+. So, according to Deloitte, the BoJ buys all of their new sovereign debt.

    As our deficits continue to grow, servicing the interest will become increasingly formidable at market rates. The only way to get interest rates below the inflation rate will be for the government to resume QE to reduce the yield on sovereign debt.

    And that artificial low interest rate will dissuade foreigners from buying our debt.

    • HowNow says:

      DF: The quote from Zell makes sense. But to get to the point when foreign investors do not buy U S debt is hard to imagine at this point in time. If the interest rates are high enough, some investors will buy Argentinian debt. If interest rates are artificially low, then you have a situation like that in Japan, the only buyer is the BOJ.
      Indebtedness depends on the risk lenders are willing to accept. The strength of the U S, in so many aspects – not least of which is military might – is what keeps our world reserve status in place.

      • Einhal says:

        Yes, except that our military might is paid for with money that is effectively the result of being the reserve currency.

        It’s circular.

      • Occam says:

        The fact that the BOJ is (and has been for quite a while) monetizing 100% of new government debt issuance without damaging the yen is amazing. Japan seems to be at the end game of its fiat currency regime, and yet no one who matters seems at all concerned. They must be convinced that big-time inflation in Japan is impossible for structural and cultural reasons. If the yen ever hits 200 to the dollar, that thesis might be tested.

        • HowNow says:

          John Mauldin has been prophesizing that the Japanese currency was a “fly looking for a windshield”. But he’s been saying that for about 20 years now.

        • VintageVNvet says:

          Last time I was in Japan, courtesy of Uncle Sam, yen was 300-305 per USD O.
          Perhaps improbable, but certainly not impossible it will be there or somewhat close again,,, especially if BOJ keeps on with the ZIRP, or close, eh

  21. Thomas Curtis says:

    Thanks Wolf!

    This is like a ‘CliffNotes’, perfect!

  22. Micheal Engel says:

    China and India aren’t paying for Russian oil in gold. They barter and pay in deflated currencies.
    China and India will never sell one ounce of gold. They constricted the gold market for years, but gold didn’t care.
    Gold was rising when the Fed raided “other” people money in Oct 2008 and in Mar 2020.

  23. Putter says:

    Hemmingway: How did you go bankrupt? Two ways. Gradually, then suddenly.

    • Wolf Richter says:

      1. Countries that borrow in their own currency, such as the US, by definition cannot “go bankrupt.”

      2. Bankruptcy is a legal process that provides the borrower protection from creditors while the bankruptcy court sorts through the claims and decides what to do with them. There is no bankruptcy law for countries. Even US states cannot file for bankruptcy. But municipalities can (Chapter 9 of the bankruptcy code).

      • GrassRanger says:

        The US cannot go bankrupt but the bond market can decline to buy its debt. That would be essentially the same thing, just not a legal action. Not saying that is going to happen anytime soon, but that would be the ultimate end of the current dollar.

        • SoCalBeachDude says:

          How would a decline in the bond markets with yields rising be in any way an ‘end’ for the US dollar at all?

        • Wolf Richter says:

          That’s not how it works. Yields will rise until demand appears. Yield solves all demand problems. That’s why junk bonds find buyers. The issue for the bond market is inflation. If inflation shoots higher, yields will shoot higher. Inflation devalues existing debts, and the burden of existing debts at the expense of bondholders. So a lot of inflation will lower the debt burden for the US, but it will also make it much more expensive to pay for new debt because bondholders will demand much higher yields to take those risks. So this is not a good situation, neither for the government nor for investors. The Fed is keenly aware of it, and I doubt inflation will be allowed to go this high.

        • Swamp Creature says:

          As the spread between the pandemic mortgage interest rates of 3% and the current rate of 7.39% continues to widen, look for all discretionary home sales to dry up completely. Who in their right mind would trade a 3% mortgage for an 8% mortgage which is just around the corner. Home prices here in the Swamp are now going up even with these higher mortgage rates. There are hardly any listings anywhere. Home affordability is at the lowest level in 40 years. We’ve got high prices and high interest rates at the same time. To top it off Lendors are salivating and putting loans on any piece of crap that hits the market. Most of them are out of town and don’t even know what they are lending money on. They are dumb as s$it.

  24. Brant Lee says:

    Collectible gold and silver coins are a hot ass commodity among those who like numismatics at the moment. Outside of this, I’m not so much of a gold bug anymore. Most people do not know gold and silver when they see it, much less have any outside of jewelry. Buying bullion rounds and bars is seldom a good investment. Fake coins are out there in droves, leave it alone.

    I bought some gold at $300 in 1999. So what? That year I could have bought Amazon shares at $2. Go figure.

    • Putter says:

      You also could have bought ATT at 40. It is now 14.50.

    • Flashman says:

      Wolf, would you help out all these gold as investment people by reposting your comment that gold is a way to use a hedge to diversify. Thanks. You might also want to give them your definitions of an investment.

      • Wolf Richter says:

        OK, here you go:

        The reason you own gold is as a hedge against a plunge in stocks or bonds or whatever. Gold is a hedge, it’s diversification. The price of gold can plunge, but hopefully it doesn’t plunge at the same time that your other assets plunge. That’s diversification. Hedges and diversification have a cost. And sometimes they don’t work. But that’s the role of gold for investors. As soon as people think gold is something else, such as an income-producing asset, or something that will make them rich, or whatever, they’re speculators in no man’s land.

  25. Putter says:

    I was referring to the demise of the dollar. Good riddance. We have destroyed purchasing power, while sending jobs overseas. Perfect recipe for homelessness. They say many homeless have mental problems. I would too, if I lived in a box. PTSD, anxiety and depression. Thanks Fed and Congress. All politicians who voted for unsustainable debt are traitors!

    • Wolf Richter says:

      This “demise of the dollar” stuff in the comments is just hilarious. I have no idea why people enjoy posting this stuff year after year after year. And the dollar is still here, doing fine.

      • Thomas Curtis says:

        Your explanation of how bonds and yields and debts and inflation all work together was wonderful!!!!

        As sussiant and complete an explanation as most investors ever need to grasp and I bet it was right off the top of your head. If you are not a multimillionaire I don’t know why.

        Anyway, you are a blessing to average Old Joe’s like me who are just trying to hang onto their retirements and probably some smart Young Joes getting their first grasp of the money world.

      • PhilipIoM says:

        Hilarious is not a term I would use to describe the decline of a reserve currency. My local currency – the £ sterling – used to be a reserve currency, but in my lifetime, has declined to 30% of its former value. Understandably I’m not filled with hilarity.

        • eg says:

          Many of us whose ancestors were victims of the long and terrible reign of your colonial empire, on the other hand, are enjoying your richly deserved comeuppance.

        • KGC says:

          The Pound is still a reserve currency, and has held a fairly steady percentage of the reserve market (as shown in graphs above).

          Purchasing power is not the same as reserve status. That loss of value is inflation.

        • 91B20 1stCav (AUS) says:

          eg – ‘…the sins of the fathers…’ are with every one of us, every day…

          may we all find/make a better one…

        • NBay says:

          Sins…..yeah…..we murdered our way from sea to shining sea…..didn’t even think the natives could be enslaved (probably right judging by the ones I went to HS with).

          But what’s a more “evil” evil, when a whole country is in that league?

          Sorry to those bothered by “woke” think…..I promise I won’t tell your kids.

          You’d also better hope human caused climate change is linear.

        • NBay says:

          I like “may we all MAKE a better day”…well….better.
          It doesn’t look likely there is going to be one just lying around.
          Just a suggestion, buddy, it’s YOUR mellow trademark, unlike my blunt, and not very sociable stuff. (sorry Wolf) And we DO have to get along to do anything.

  26. SoCalBeachDude says:

    Gold is just another commodity. It is no more a currency than are bird feathers, beaver pelts, glass beads, wooden nickels or anything else that has ever been used as a bartering medium of exchange. The total amount of gold that exists in the world (with 70% in the form of jewelry) is only about 200 metric tonnes which even at current market values is worth only about $7 trillion which is less than 1% of total assets in the world. Gold is great for jewelry or lining koi ponds and a few other things, but it is just a commodity for doing that and nothing else at all. And by the way, the commodity of gold is priced in US Dollars as are all of the other around 28 commodities in the world.

    • Do the math jack says:

      200 metric tonnes?

      You need to redo your post with the correct numbers numbers.

      • SoCalBeachDude says:

        Two hundred thousand metric tonnes of gold is all that has ever been mined and is worth less than $7 trillion which is a trivial little amount of gold that will fill only about 2 Olympic size swimming pools and which is less than 1% of the assets in the world today. Gold is totally irrelevant as an asset class and exists 70% in jewelry widely distributed around the world. On a per capita basis for the world’s population of around 7 billion people in 2023 the total amount of gold that exists equals about 1/10 of one ounce per person.

        • SpencerG says:

          You need to read your first post again (and a couple others throughout this discussion). There is a rather large difference between 200 metric tons and 200,000 metric tons.

        • Steve says:

          putting worth on worthless things is a time tested fraud against humanity that central banks have made a science. Some things have worth for a little while by semantics. Some things have worth by logic. Some things have worth by truth. So timing and picking cycles is the way? Yet some things remain priceless. Look at gold and virtue as an abstract. Two things in history that have always been recognized as precious and desirable Yet in the last what 60-70 years the world knows better? Or maybe the world has just lost its way and needs to get back on track. We shall see.

  27. Bobber says:

    How many times can a country debase its currency via inflation, money printing, deficit spending, etc., while expecting long-term bond markets to remain orderly?

    I think we’ll get the answer to that question in the not-to-distant-future. Central banks have been on thin ice for a while now, and they are growing more confident. Each day, they walk us closer to the open water in the middle of the lake.

  28. Debt-Free-Bubba says:

    Howdy Folks, This old fool still believes the US is the best. The entire world seems to be on the same tracks. We will end up on top of what? Long way to go for that answer…..

    • Thomas Curtis says:


      I am with ya! If we don’t weaken we can stay on top this century.

      I think a lot of foreigners may look at our wealth and think how lucky we our and not grasp how we struggle. I do worry that the young are not struggling enough but I could just be an old fogy!

      • Einhal says:

        The young are struggling WAY more due to bad policies that benefit the old.

        • Thomas Curtis says:

          Could be. The old vote and have the money that works in THE capitalist democracy.

          I wonder Einhal, are you old or young?

        • Debt-Free-Bubba says:

          Howdy Einhal, agree with you about Government policies that really hurt the young and old. ZIRP was a big mistake that benefited the young……

        • rojogrande says:


          The objective of ZIRP and QE was to inflate asset prices thereby creating the “wealth effect.” Most assets are owned by older people who’ve had more time to accumulate wealth. I agree ZIRP was a huge mistake, but it was a mistake that disproportionately benefitted older people.

  29. Citizen AllenM says:

    I applaud Wolf for continuing to fight the tidal wave of hard currency idiocy. I remember Ron Paul picking up the John Bircher idiocy, and Christian Gold, blah blah blah. So many people want a system that is simple and easy to understand.

    In short, because all finance involves cycles of up and down, Wall Street makes money. Investment go in and out of favor, bubbles happen, etc. The currency is mostly background to human foible. But that craving for stability is what makes most systems unstable, because stability without allowing for excess will be broken. The history of currency is full of attempts to impose mechanical stability, and the eventual failure of those under the pressures accumulated and open attack by the rich.

    The really funny part is that the dollar is freely convertible to gold and silver on a daily basis, and the wall street gamblers have even instituted far cheaper ways to buy and sell electronically that physical could ever achieve. And yet the fantasy of a “stable” dollar continues. All those booms and busts during the hard gold standard days seem to be entirely forgotten in the mists of history.

    The fantasy of bitcoins is just another version of this.

    The long term value of the dollar will decline, and guess what, asset prices in dollars may well decline as well. As for responsible fiscal policy, ideology has destroyed any reasonable chance at that happening.

    The Trump tax cuts are a prime example of failure to understand the principles of the exorbitant privilege.

    • Einhal says:

      Those tax cuts are a prime example of failure, but handing out trillions of dollars to people and businesses who didn’t need it was the result of great understanding?

      • NBay says:

        “Look over where?”….

        …..sorry, E, but I’m kinda slow…..still thinking about A’s tax cuts part, and his other fine observations.
        At this point I don’t think you tipped any mental scales very far.

    • Happy1 says:

      Totally agree regarding crypto.

      Totally disagree with the rest.

      The US was very well served by the gold standard and had higher economic growth prior to the Fed. This is historical fact and can’t be disputed.

      Ron Paul as President would have been the best thing to happen in US politics in at least 50 years.

      And what do tax cuts have to do with fiat currency? The Federal deficit problem we have now is almost entirely related to the 30% increase in spending since 2019, for which both parties are responsible.

  30. 91B20 1stCav (AUS) says:

    CAM- well said, and thanks for reminding us of our multiple ‘Panics’ in the 19th century (…and, our continuing quest for financial (among other things) ‘stability’…).

    may we all find a better day.

    • HowNow says:

      Thanks for the reminder, again, 91B20 etc. Most of the stupid comments on this site are from people who select some things as gospel while ignoring a vast amount of other things, bank panics and runs prior to the Federal Reserve stabilizing the currency (in fits and starts), that got us to where we are today. And, even now, the dynamics of the economy are still not fully understood. Especially people like Ron Paul who have mesmerized a lot of ninnies.
      The Romans debased their currency over time – coins had less and less gold in them. But that was an empire that 1) was built on plundering the villages, towns and cities in all directions, and 2) lasted for 500 years. It nearly fell apart but revived and lasted a few hundred years more in their “empire” stage.
      Some commenters don’t realize that gold has longevity but is no more a currency than Beany Babies. If you really believe in the gold standard as the “real deal”, buy as much of it as you can with those worthless dollars and see how it goes. If it doesn’t work, like the author of pragmatism, Peirce, said, it’s essentially meaningless.

      • HowNow says:

        Correction: the Roman Empire lasted approx. 1000 years. Lots of time for people to rant about the dilution of the currency which started as bronze. Eventually it went to silver, then gold, then lots of other metals.

      • Steve says:

        you can always convert gold to currency, but you cant always convert currency to gold. What is not reflected in the variable is the value/risk of time. Dollars are good now because it’s their time. But in a crisis like a volcano or nuke wiping out big populace then time is up for the dollar. Gold is wealth for all time and can always be converted to a currency. Fiat currency is only good when it is its time being only an invented faith structure, and faith in fiat currency…well time is up.

  31. Danno says:

    Even in communist Cuba, The USD is the preferred currency..

    200 pesos to 1Usd…

    One is living large with USD there like many 3rd world countries at this time.

    Russian ruble or Chinese Yuan no where to be seen

  32. AK says:

    “Even as inflation backed off in the 1980s, it took a long time for the world to regain confidence in the dollar.”

    Chart shows that USD’s share of foreign exchange reserves suddenly went up in a dramatic manner around year 1991. What caused this ? IMHO it was caused by United States achieving colossal geopolitical victory – it’s main antagonist (Soviet Union) had collapsed. I would speculate that dramatic rebound in USD share of foreign reserves was primarily caused by this geopolitical victory, not by Federal Reserve’s success in suppressing inflation (which was necessary but secondary factor).

    • sunny129 says:

      What other currency inspires ‘confidence’ compared to US$ either now or in 80s?
      Remember TINA!

  33. dishonest says:

    Well researched and graphically illustrated Wolf, but perhaps a paragraph towards the beginning summarizing how this effects the American “man on the street” would be informative.

  34. sunny129 says:

    Any gold backed currency is a ‘myth’ unless it is readily available to convert into gold 24/7 with no limitation.

    There is NO such currency so far

    Demise of US $ is another prophecy with no other currency available to replace it as a ‘trading’ currency in foreign cash transactions but rumors keep floating. All other currencies are ‘relatively’ valued against US $ along with supply and demand. NOT against gold or other commodity so far.

    • SoCalBeachDude says:

      Nor can or will ever be any such currency. However, people can always buy gold if they choose in US Dollars in which it is and will be priced.

  35. William Leake says:

    Okay, I will weigh in. I never understood the fascination with gold. Gold, tulips, South Sea Company, AOL are all stuff you buy. That’s it. As for BRICS, look at what that acronym stands for: Brazil, Russia, India, China, South Africa. I don’t want anything to do with those countries, although I realize I have to buy some stuff from China since a lot of our industries were off-shored there (big mistake imho).

  36. Gold is good says:

    Every time these articles show up there are numerous anti-gold comments about it especially that it had no value and isn’t money.

    People use some kind of weird word play to make their point.

    Gold had been and will always be a store of wealth as long as people deem it worth holding.

    It can also be asset and used to offset risk.

    Please compare what the following will buy over time and see what the results are:

    An hour of work
    A one dollar bill
    A one dollar gold coin
    A gram of gold

    Or better yet the price of the following in terms of how many hours of work at the prevailing wage at the time it will take to buy:

    A one dollar bill
    One gram of gold
    A pound of wheat
    A pound of potatoes

    Next ask people in Argentina, Brazil, Russia, Syria, Zimbabwe or even Germany or Japan which would have been better to hold at certain periods of time in their country:

    Their national currency or gold…..

    • William Leake says:

      Gold is a commodity, just like any other commodity.

      • Occam says:

        Basel III reclassified gold as a bank reserve asset, from tier three to tier one (or maybe two). It’s more than an ordinary commodity. Gold also has a psychological hold on many people because of its long and prominent history and related symbolic value. As WR said, its place is as a hedge and a diversifier for individual portfolios, and I see it as also an insurance policy against government stupidity, which seems to be increasing rapidly. It’s a small part of a much bigger picture.

        • William Leake says:

          Basel III. Excuse me while I laugh.

          Any commodity can be used as a hedge. It should be liquid enough.

        • Tinky says:

          William Leake

          Odd that gold is the FIRST asset listed on the ECB balance sheet, and oil, nor soybeans, etc., are nowhere to be found.

          Chuckle away, if you like, but central banks’ accelerating purchases of gold have meaning, and the metal is not like other commodities in that, and other important respects.

    • Ltlftc says:

      You can tell that sock puppets are likely used by analyzing sentence structure. Punctuation is varried and is usually a sign of the above when the grammar and syntax seem at a higher level, incompatible with the punctuation presented. It is easier to change punctuation than syntax.

      Their logic is usually a mess with fallacies strung together.

      To be fair though, there are plenty of people who believe that gold will somehow make them rich, “to the moon and when lambo”, so idiocy isn’t a one way street.

      • HowNow says:

        Carlo Cipolla, an economist, taught us that stupid people are more damaging to a society than bad or malevolent people. Society pays a high price for the stupid ninnies to wander about and f’up things, like vote for con men.

        • William Leake says:

          I actually took a grad course from Carlo Cipolla, the last one he taught. I was the only student in the class.

  37. TK says:

    How did this discussion become one of gold? Gold was once the plunder of war when Countries refused to settle their balance of payments. The article showed us the relative strength of the dollar and euro. There are many influencing variables, but mostly the reliability of the Country. Watching the DXY might help us see whether the world thinks our inflation is trending down, or whether the world sees our political system stabilizing. But the US and European, Australian etc. rules of law are still the best in the world and therefore most trustworthy. I hope that doesn’t change.

    • 91B20 1stCav (AUS) says:

      TK – perhaps a population’s proportion of their interest in gold could be inversely-extrapolated to that population’s faith in the health and future of their polity?

      may we all find a better day.

  38. SpencerG says:

    Wolf’s repeated posts on this topic have convinced me of one thing… the need to stop worrying about the U.S. Dollar as the global reserve currency. There simply is no viable substitute… and a LOT of things would have to go wrong in America before other nations start looking for one.

    Perhaps our nation would be better off making sure that those things don’t go wrong rather than worrying about the Euro, renminbi, imaginary BRIC currencies, or gold displacing the dollar’s role in global trade. You know… like controlling inflation and national debt!

  39. eg says:

    Why would the Chinese “try to take” Taiwan? I’ve yet to hear a credible case when all they really have to do is wait and let time and proximity take its course.

  40. John H. says:

    So, is it fair to sum up this way:

    1. Governments don’t go “bankrupt”; rather, they destroy their own currency via doom-loop deficit spending and monetary issuance.

    2. This time around national governments are ALL in deficit spend mode, so there’s no foreign currency to run to fro wealth protection.

    3. General public (in US and around globe) is “taxed” via perennial wealth reduction via shrinking purchasing power.

    4. Government scope and function continues to grow.

    Seems likely to result in a Weimar quick end, or an Argentinian slow end. Or is there some third way.

    • Occam says:

      Excellent summary John H. The third way is a war or other existential crisis that gives government an excuse to restructure its currency, debt and economy. Oceania has always been at war with Eastasia, as George Orwell once observed.

  41. spencer says:

    When the balance of payments is balanced by foreigners acquiring net holdings of our equities, bonds, and real estate, and capital outflows (interest, dividends, rentals, etc.) exceed inflows, we are either decreasing our net creditor position in the world, or increasing our net debtor position.

    Beginning 1985 it has been the latter. The trade deficits, plus the unilateral transfer of funds by the Federal Government to foreigners, transformed this country from this world’s largest creditor to the world’s largest debtor – for the first time since 1917. Since 1985 we now have a net debtor position, but the principal villain (since 1973) was our prior dependence on foreign oil.

    • 91B20 1stCav (AUS) says:

      spencer – might stick the word ‘cheap’ in front of ‘foreign oil’…

      may we all find a better day.

  42. spencer says:

    Last time I tallied our net deficit position in 2021, it was > 18 trillion dollars.

  43. cresus says:

    It will be difficult for Americans but in the end will be better for America. No more never ending wars of empirial aggressions all over the world.
    Let’s end the dollar supremacy now.

  44. spencer says:

    You’d have to agree with Bernanke’s savings-glut hypothesis.

  45. random50 says:

    Forex confuses me. The dollar has dipped recently against the pound because – as far as I understand the reasoning – the UK is doing a horrible job managing inflation, and interest rates are therefore expected to go and stay higher, while (relatively speaking) the US is doing a better than expected job. The UK economic news seems persistently much gloomier as well, but that doesn’t seem to be moving the needle either way.

    So inflation is good for a currency short term, but bad long term, as seen by that huge dip in the dollar reserve share in the late 70s? Is it fair to say changes in interest rate expectations cause short term shocks in forex, while economic strength or decline and inflation are long term drivers?

  46. RickV says:

    The US dollar will probably be the world’s reserve currency for our lifetimes, and gold, a “former” reserve currency, functions today as a canary in the coal mine warning when governments overplay their hand as world central bankers and excessively increase credit.

  47. Shorts says:

    Hi Wolf, is raging bullshit still around or rigged game? I’ve been looking but can’t find any links.

  48. RedRaider says:

    Some misconceptions about gold:

    1. Gold is NOT money. It used to be, may be again, but is not NOW money. Although it is not money, it is one small baby step away. No one has ever had trouble converting gold into money. Gold has a 5,000 year history of maintaining value. This value fluctuates but it has never been zero. On the other hand, no fiat money has ever survived. The current fiat regime is a massive 50 year experiment. To me, it doesn’t look like the experiment is going to succeed.

    2. Gold has a strong negative correlation with USD, indeed, every fiat currency. And, since currencies are supported by higher interest rates, gold has a negative correlation with interest rates. And it’s not nominal interest rates but real interest rates (ie, inflation adjusted). This should be of interest to all of us right now.

    3. You don’t just go out exploring for gold and start mining once found. It’s estimated that there’s a 7 year delay before you can mine.

    4. Gold is a excellent radiation sponge. Just read today radiation has been detected in Ukraine. Could be a false flag. But, if true, Ukrainian gold becomes a pariah and gets subtracted from the global total. Of particular interest is India. Gold is culturally very important. I’m sure you’ve seen pictures of Indian brides wearing all the gold. That’s their dowry. India’s bad/worsening relations with Pakistan, China is not good seeing they are one and all. nuclear powers. And there are other bitter rivalries in the world.

  49. The sooner the dollar is no longer in such high demand as the dominant global currency, the better for America. The high demand for the dollar has driven the dollar’s value so high relative to the currencies of countries like China and Japan that made-in-America products are no longer competitive with many foreign-made products.
    This directly causes: America’s large and growing trade deficits, America’s “status” as the world’s largest net debtor to foreign countries, the sharp drop of America’s manufacturing sector against other sectors in terms of share of GDP and share of employment, and the loss of millions of well-paying middle-class jobs. These factors in turn slow the growth of the US economy and the US tax base, leading to record budget deficits.
    To fix these problems, America urgently needs to implement a Market Access Charge (MAC) — a small variable charge applied to all foreign-source money seeking entry to America’s financial markets. By moderating speculative demand for the dollar, the MAC will prevent the value of the dollar from rising so high that it kills our manufacturing sector, our economy, our national security and the American Dream of steadily rising growth based on rising productivity with benefits widely shared by all Americans.

    • rick m says:

      Your Market Access Charge sounds like a cover charge for a mosh pit. So it’s probably a good idea. I go back and forth on protective tariffs, mostly pro, as befits a mudge. Reserve status of the dollar will endure longer than we need to fix it’s problems. There’s no compelling reason for any country to change to a less liquid substitute. And the relentless generosity of the United States means a lot. Nobody seems to be turning up their nose at foreign aid denominated in dollars

    • JimL says:

      Ugh. Terrible.

      You are forgetting that there are also large benefits to a strong dollar and having the dollar as a reserve currency for much of the world.

      Like everything else, there are pros and cons. Tradeoffs.

      A high dollar means that Americans can buy stuff cheaply compared to people in other countries. Look how long the average American has to work to buy a ton of steel on the worldwide market. Or a barrel of oil. Then compare it to how much a Chinese worker has to work to do the same. Or a Russian worker.

      A strong dollar can be either good or bad, it depends upon a ton of other factors. Also, America (and Americans) derive huge benefits from being the world’s reserve currency of choice.

      Sure it would be great if more manufacturing jobs came back to America, but not if it meant cutting high paying IT or service sector jobs in order to get those manufacturers jobs back.

      Always a tradeoff.

  50. Paul S says:

    This is a fantastic article and wonderful set of comments. Most appreciated and it forces me to comment after surviving as a lurker for the last few years. (I pissed Wolf off and avoided a screen lashing for a while). I’ll give it a go as God hates a coward, so they say.

    About 15 years ago I listened to a presentation by Gwynne Dyer (English historian and author) on current affairs. What he said still rings true. I specifically asked him about the demise of the US Dollar as a reserve currency. Did he think it would occur any time soon? He answered that no, it would not be soon but one day it would happen. It always does, one day….currency decline. He smiled and said, “life goes on, the standard of living might decline, but they’ll get over it. We did”.

    Many of the comments here seem to imply that the examples of economic stagnation and malaise are a result of _____________ (fill in the blank with your pet drumbeat…… taxation, Govt waste, giveaway programs, whatever.) And gold bugs always seem to argue that they will survive this impending economic collapse with a hefty store of physical gold, etc. People have told me they will be able to trade gold for needed food, fuel, until some such time ‘the Govt’ comes to their senses and fixes everything by ___________(fill it in).

    Like a diverse family, just when have the states ever got along and pulled in the same direction? Some say precisely just two times in the Country’s history, right after Pearl Harbor and right after 9/11. But that doesn’t mean the economic family is in collapse, and nor is the currency, the potential…….. The potential is there because the foundation is strong.

    There is a reason for the vast lineups at the border, and these poor folks are not trying to find the fastest sinking ship to jump on. Take away the crazy politics and the plusses still far far outweigh everything negative. The US has a huge manufacturing capability. Of course there is a rust belt and regional declines, but for every closed steel plant there is some other economic force in development with impending production. It’s just change at work, pun intended. The foundation is sound; education, R&D, rule of law, ability to criticise authority, freedom of movement, and the ability to create debt to promote innovation and new constructive opportunities. The ability to Finance, God forbid, the ability to borrow.

    There is opportunity. Problems yes, but opportunities abound. Add to that adequate energy supplies and production, future energy solutions to augment declining FF use, self sufficiency in food production, etc etc.

    Things need fixing, adjusting. Many issues like income inequality, homelessness, environmental/climate disasters, demographics and immigration, just have to be dealt with one day. It can be done in the States because the foundation is still there to support needed fixes.

    I really believe the fearful decline and economic malaise we are witnessing is simply the rule of diminishing returns at work, until the next or another big development occurs. (And maybe there won’t be one, but….) My parents were both survivors of a terrible Great Depression childhood….10 years worth. Both were WW2 vets, overseas for D Day. My Dad always used to say about the Depression, “We were farm folks, so we had enough to eat. We just didn’t have any money. We never had any money to buy anything”. His Dad lost his fuel business because his customers didn’t have any money to pay for the fuel they needed. Dad and son both ended up both having to work in a slaughterhouse killing and processing pigs, until WW2 broke out. You’ll do whatever you have to in order to survive. My Grandpa said the sound of ‘stuck pigs’ will haunt him forever. They scream. He died an alcoholic……….

    Say what you want about debt, but without the ability to create it and finance new opportunities, well, I don’t think any of us would want to live in that world at all. The life of my parents, the time of the Gold Standard no less, was simply grinding poverty. My Mom had one set of clothes and shoes. They were often hungry in her house. As terrible/challenging as things can be pointed to now, no one lives that bad these days, and nor should they. And less than 100 years ago Europe was totally at war. Now they have an economic union and work together. Go figure.

    I wouldn’t bet against the USA just yet, and I am Canadian. Nor would I bet against the West in general. Problems? Sure. But life is still far better than it was when my parents were young and that is pretty recent in the scheme of things. Reserve Currency decline? One day it will happen. So what? Change is life, itself. North America is full of opportunity, imho.

    • Steve says:

      My response is, as has always been – only people who work very hard and save/reinvest, without borrowing, should be(allowed to be) rich. Its simply the right way(to me). Lots of people everywhere are rich and very rich. Lots and lots. Just not the right way. This is only my opinion and very few might agree. It is possible to do this, much more slowly, but very rewarding.

      • JimL says:

        I get working hard and saving, but why no borrowing?

        I am neither for or against borrowing. I just think of it as another tool. Neither good or bad. Just like a hammer. Depending on how a person borrows and what they do with the money it can be good or bad.

        Borrow outrageous amounts that are instantly callable, and spend it on wild goose chases. Sure that is dumb. Borrow moderate amounts and invest in machinery that will provide a greater return going forward. That is smart.

        • Steve says:

          This is only my view: debt is slavery. Greed makes one borrow. Slavery and greed are vices. Virtue leads to peace that is immeasurable. Greed leads to never enough. Debt and greed are like drugs(to me). They seem great at first but then turn to destroy you. Many a man has fallen by them both. An exceedingly great many.

  51. Shawn says:

    This whole BRICS currency thing is silly at best. Wolf is completely correct on this. A gold back currency has to be convertible on demand. Does Brazil, Russia, India, China and South Africa want that is that even possible. Nada on both accounts. The proposed BRICS trading currency is a return to Bretton Woods, minus the gold, which surely will not be convertible on demand for the actual traders, individuals and corporations.

    • Steve says:

      What about the possibly of a new BRICS digital currency that is LEGITIMIZED by their gold\commodity holdings and backed by their combined military and unity? seems the U.S. is not in unity but chaos from debt and immoral destructive narratives. I see a path for them because they carry the majority of the worlds population and trading, so whatever they invent could have traction. We already use digital money(credit cards) and cash is already archaic so be ready to be shocked, possibly multiple shocks. Remember fiat currency is invented so it only needs faith in it and what backs it so this new money/money system could be adopted in the right environment – like how (maybe) they’re(conspiracy the worlds richest elite) are trying to crash the existing global financial system through debt defaults/pandemic shutdowns/supply chain blocks/strikes/ food shortages/wars/climate changes etc. Seems something is coming and soon.

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