How the West Was Lost: A Faltering World Reserve Currency

How the West Was Lost: A Faltering World Reserve Currency. By Matthew Piepenburg.

Just two years ago, I wrote a book warning that Western markets in general, and US markets in particular, were Rigged to Fail.

Well, now, in real time, they are failing.

This hard reality has less to do with COVID or the war in the Ukraine and more to do with one simple force, which euphoric markets and clueless leaders have been ignoring for decades, namely: Debt.

As I wrote then, and will repeat now: Debt destroys nations, financial systems, markets, and currencies.

The inflationary financial system is now failing because its debt levels have rendered it impotent to grow economically, react sensibly or sustain its chronic debt addictions naturally. …

No wiggle room left:

The Fed has driven itself, and hence the U.S. markets and economy, into an all-too predictable corner and historically dangerous crossroads.

If it turns to the left (i.e., more money printing/liquidity) to protect a record-breaking risk asset bubble, it faces an inflationary flood; if it turns to the right (and raises rates or tapers UST purchases), it faces a market inferno. …

As the “Covid crash” of March 2020 painfully reminded us, in a world of central-bank-driven bubbles, historically over-valued stocks and bonds can and will fall together unless the Fed creates yet another multi-trillion-dollar QE lifeboat, which just kills the inherent strength of the dollar in your wallet.

Hence and again: There’s no good options left. It’s either inflation or a market implosion.

The demands of politics will ensure that the central banks choose the inflationary option. They already have. (At the end of the raring 1920s they choose the market-rights-itself option. Nuh, not going to do that again.)

So, what will this cornered and debt-drunk Fed do?

Well, what all addicts do—keep drinking—i.e., printing ever-more increasingly debased USD’s—which just creates more tailwinds for, you guessed it: Gold. (But also hard asset commodities in general, industrial equities and agricultural real estate.)

In the meantime, the Fed, the US Government and its corporate-owned propaganda arms in the U.S. media will blame all this new money printing and continued deficit spending on Putin rather than decades of financial mismanagement out of DC. …

End of an era of US financial dominance and the single global financial system:

Imagine, for example, if your bank accounts were frozen for any reason. Would you then trust the bank that froze your accounts down the road once the issue was resolved? Would you recommend that bank to others?

Well, the world has been watching Western powers effectively freeze Putin’s assets, and regardless of whether you agree or disagree with such measures, other countries (not all of which are “bad actors”) are thinking about switching banks — or at least dollars…

If so, the US has just shot itself in the foot while aiming for Putin.

As previously warned, the Western sanctions are simply pushing Russia and China further together and further away from US Dollars and US Treasuries.

Such shifts have massive ripple effects which Biden’s financial team appears to have ignored.

And as everyone from Jamie Dimon to Barack Obama has previously warned, that’s not a good thing and is causing the broader world to re-think US financial leadership and US Dollar hegemony as a world reserve currency.

Saudi Arabia: Re-Thinking the Petro-Dollar?

Take that not-so-democratic “ally” of the US, Saudi Arabia, who Biden had called a “Pariah State” in 2020…

As of March, the news out of Saudi is hinting that they would consider purchases of oil in CNY [Chinese Yuan] as opposed to USD, which would signal the slow end to the Petrodollar and only add more inflationary tailwinds to Americans suffering at home.

One simply cannot underestimate (nor over-state enough) the profound significance of a weakening Petrodollar world.

It would have devastating consequences for the USD and inflation, and would be an absolute boon for gold.

Already, Xi is making plans to negotiate with Saudi Arabia, which is China’s top oil supplier. Meanwhile, Aramco is reaching out to China as well. …

As of this writing, Arab states are in private discussions with China, Russia and France to stop selling oil in USD.

US inflation will soar as those US dollars currently used for world trade return home to the US, the last place where they can still buy something:

Such moves would weaken USD demand and strength, adding more inflationary fuel to a growing inflationary fire from Malibu to Manhattan.

I wonder if Biden, Harris or anyone in their circle of “experts” thought that part through? …

A multi-currency new world:

The bottom line, however, is that the world is slowly moving away from a one-world-reserve-currency era to an increasingly multi-currency system.

Once the sanction and financial war genie is out of the bottle, it’s hard to put back. Trust in the West, and its USD-led currency system, is changing. …

As multi-currency oil becomes the new setting, the inflationary winners will, again, be commodities, industrials and certain real estate plays.

As for gold, it remains the only true neutral reserve asset of global central bank balance sheets and is poised to benefit the most over time as a non-USD denominated energy market slowly emerges.

For those (i.e., Wall Street) who still argue gold is a “pet rock” and “barbarous relic” of the past, it may be time to rethink. After all, why has the Treasury Department included an entire section in its Russian sanction handbook on gold? The answer is as obvious as it is ignored. …


The mighty dollar and “globalization” dreams of the West are slowly witnessing an emerging era of inflationary de-globalization as each country now does what is required and best for itself rather than Klaus Schwab’s megalomaniacal fantasies.

The cornered US, of course, will likely try to sanction gold transactions with Russia, but this would require fully choking Russia energy sales to the EU, which the EU economy (and citizens) simply can’t afford.

We are nearing the end of a three-century trend towards ever looser banking and increasing debt. This might get interesting, especially if the death throes happen suddenly.