Wednesday afternoon gave a devastating blow to the U.S. Dollar. From the forefront of England, talk of China’s renminbi replacing the U.S. dollar the world’s reserve currency echoed though the chambers of an online Q&A Mark Carney hosted.
“I think it is likely that we will ultimately have reserve currencies other than the USD,” Carney said in an online Q&A. “The evolution of the global financial system is currently lagging behind that of the global economy, and there are asymmetric concentrations of financial assets in advanced economies relative to economic activity.”
In the past several decades, the U.S. dollar as been the world’s reserve currency.
A reserve currency (or anchor currency) is a currency that is held in significant quantities by governments and institutions as part of their foreign exchange reserves. The reserve currency is commonly used in international transactions, international investments and all aspects of the global economy.
An asset transfer out of the U.S. Dollar and into the renminbi would have a devastating impact on the value of the dollar relative to other currencies. The impact of the transfer will not happen overnight, but the process will devalue the savings and purchasing power of millions of Americans. Furthermore, the change in the global currency shows the power China will have over the US in the future.
It would be a damn good time to own gold, silver or any other decentralized currency. With the debt the US has and an environment with real possibilities of increasing rates, any hedge against the entire system is prudent.