The USD Could Lose Petrodollar Status: How Do You Prep for That?

If you knew that you or your family’s breadwinner was terminally ill and there was absolutely nothing you could do to stop the decline, would you try to prepare? I’m not talking about just getting your mind wrapped around it, although that’s important too. I mean, physical preparations.

  • Getting your finances in order.
  • Getting urgent tasks completed.
  • Figuring out how those left behind would survive when the person was gone.
  • Completing important paperwork like wills, adding a loved one to your financial accounts, making sure your spouse was able to speak to the people at utility companies, and appointing someone to have power of attorney.

If your failing health allowed it at all, of course, you would. You’d organize everything to lift some of the burden from the people you were leaving behind.

So if we know that the US Dollar is gasping its last breath, why wouldn’t we do the same and prepare to live without it?

Is the dollar dying?

Read different websites and get different stories. Many prominent financial experts are absolutely convinced that the dollar is gasping its last breaths, including Forbes.

During a three-day state visit, Chinese President Xi Jinping held friendly talks with Russian President Vladimir Putin in a show of unity, as both countries increasingly seek to position themselves as leaders of what they call a “multipolar world order,” one that challenges U.S.-centric alliances and agreements.

Among those agreements is the petrodollar, which has been in place for over 50 years…

…Putin couldn’t have been more explicit. During Xi’s state visit, he named the Chinese yuan as his favored currency to conduct trade in…

…other major OPEC nations and BRICS members (Brazil, Russia, India, China and South Africa) are either accepting yuan already or strongly considering it. Russia, Iran and Venezuela account for about 40% of the world’s proven oilfields, and the three sell their oil in exchange for yuan. Turkey, Argentina, Indonesia and heavyweight oil producer Saudi Arabia have all applied for admittance into BRICS, while Egypt became a new member this week.

What this suggests is that the yuan’s role as a reserve currency will continue to strengthen, signifying a broader shift in the global power balance and potentially giving China a bigger hand with which to shape economic policies that affect us all.

Forbes says that the US dollar is still the world’s reserve currency. For now. But to lose that status would be utterly devastating to our already shaky economy. If the world no longer trades in petrodollars, then the dollar is no longer the world’s reserve currency.

At the same time, other experts have pooh-poohed the idea that the petrodollar might be no more and the petroyuan was ready to jump into its place. Writers from both Barron’s and Bloomberg are confident that the petroyuan is a myth.

You should certainly do your own research about this topic, but the fact that other countries are ready to ditch the dollar is very concerning. This makes tangible assets like gold and silver among the only safe options to hold wealth.

How would it affect us if the USD is no longer the world’s reserve currency?

First, let’s talk about what it means to be the world’s reserve currency. The Council on Foreign Relations explains the importance of being in this position.

A reserve currency is a foreign currency that a central bank or treasury holds as part of its country’s formal foreign exchange reserves. Countries hold reserves for a number of reasons, including to weather economic shocks, pay for imports, service debts, and moderate the value of its own currency. Many countries cannot borrow money or pay for foreign goods in their own currencies—since much of international trade is done in dollars—and therefore need to hold reserves to ensure a steady supply of imports during a crisis and assure creditors that debt payments denominated in foreign currency can be made.

Most countries want to hold their reserves in a currency with large and open financial markets, since they want to be sure that they can access their reserves in a moment of need. Central banks often hold currency in the form of government bonds, such as U.S. Treasuries. The U.S. Treasury market remains by far the world’s largest and most liquid—the easiest to buy into and sell out of—bond market.

The International Monetary Fund (IMF), the body responsible for monitoring the international monetary system, recognizes eight major reserve currencies: the Australian dollar, the British pound sterling, the Canadian dollar, the Chinese renminbi, the euro, the Japanese yen, the Swiss franc, and the U.S. dollar. The U.S. dollar is by far the most commonly held reserve currency, making up more than 60 percent of global foreign exchange reserves.

Simply put, our status means we can use and exchange our money anywhere in the world, so other countries use it too when…

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