Weekly Market Update by Retirement Lifestyle Advocates
For several years now, I have been writing about the ultimate consequences of the considerable devaluation of the US Dollar.
Over the past couple of years or so, every American has felt the effects of this dollar devaluation first-hand as consumer price inflation has driven the price of nearly every necessity higher.
But now, even more, serious consequences may be on the horizon.
Ever since the 1970’s, when the US Dollar became a fiat currency, the dollar has retained its status as the world's reserve currency due to the agreement put in place with Saudi Arabia in the early 1970’s. This agreement had the United States offering Saudi Arabia military protection in exchange for the kingdom pricing oil exports in US Dollars. It was this agreement that established the petro-dollar as any country around the world that wished to purchase oil from Saudi Arabia had to inventory US Dollars in order to do so.
That agreement has served the US well for about 50 years. However, over the past few years, there are ever-increasing signs that much of the rest of the world is seeking US Dollar alternatives.
This past week, another major move was made away from the US Dollar as Saudi Arabia publicly announced the kingdom was actively looking to price its oil exports in currencies other than US Dollars. This from “The Gateway Pundit” (Source: https://www.thegatewaypundit.com/2023/01/another-biden-catastrophe-saudi-arabia-announces-readiness-trade-currencies-us-dollar-another-blow-us-economy/):
Saudi officials announced this week they are ready to to trade in currencies other than the US dollar in a huge blow to the American economy.
Saudi Arabia announced the move following a December meeting with China’s President Xi Jinping. The kingdom is ready to trade in yuan instead of the dollar in trade exchanges.
Saudi Arabia has also announced its intention to join the BRICS alliance.
Russia Today reported:
Saudi Arabia is ready to discuss trading in currencies other than the US dollar, according to the Kingdom’s finance minister Mohammed Al-Jadaan, as cited by Bloomberg.
Al-Jadaan’s comments come a month after China’s President Xi Jinping said that Beijing is ready to make energy purchases in yuan instead of the US dollar in trade exchanges with members of the Gulf Cooperation Council (GCC). China’s leader highlighted the necessity of the shift while speaking at a Chinese-Arab summit hosted by Saudi Arabia earlier this week.
“There are no issues with discussing how we settle our trade arrangements, whether it is in US dollar, in euro or in Saudi riyal,” Al-Jadaan said on Tuesday during an interview with Bloomberg in Davos, Switzerland.
The oil-rich kingdom is seeking to deepen its ties with vital trade partners, including China. The readiness for talks on the issue expressed by Riyadh may signal that the world’s biggest oil exporter is open to diversifying away from the US dollar after decades of pricing crude exports in the US currency. The riyal, the Saudi national currency, has been pegged to the greenback, too.
This is simply HUGE news and provides yet another reason for Americans who aspire to a comfortable retirement to diversify out of US Dollars. (One of the best ways to do this, in my view, for many investors is to consider adding precious metals to one’s portfolio.)
While I don’t know the time frame (nor does anyone else in my opinion), I believe that ultimately the US Dollar will lose its status as the world’s reserve currency. Admittedly, this opinion is at odds with the opinions of some very bright guest experts that I interview on my radio program, but in my view, the US Dollar’s devaluation will continue, and the rest of the world will increasingly and urgently look for alternatives.
“Quoth the Raven” is an interesting opinion column. Here are some comments on this recent development involving Saudi Arabia from that column (Source: https://quoththeraven.substack.com/p/saudi-arabia-just-killed-the-petrodollar):
Put simply, I believe there is a historic divide in the making between the BRICS nations, led by Russia and China, and the West, led by the United States.
I was one of the few outlets last summer to even report on the fact that Russia and China openly announced a “new global reserve currency” (announced in July 2022, predicted by me in February 2022). And of course, Russia and China can’t do it on their own: they are working with nations like Saudi Arabia and India to help put their plans into practice.
Crucial to dethroning the U.S. dollar would be the removal of its use for buying and selling oil - a system that has been in place since the 1970s when the U.S. promised security for the Saudi Kingdom in exchange for the petrodollar system that underpins the dollar’s strength as global reserve currency. It’s a topic that I discussed at length back in September with Andy Schectman on this podcast.
Andy told me back in September 2022: “The dollar hegemony is right about ready to break when you realize that Saudi Arabia is about to join the BRIC nations. Do you think Biden is going to fly there to ask for more oil? He went there to beg them not to join BRIC.”
“The dollar was made reserve currency only because of our protection of the Saudi kingdom,” Andy continued. He then noted astutely that Saudi Arabia had signed new protection agreements with Russia. “All of the Eastern European countries that have repatriated their gold. They’re all part of the EU but they all trade their own currency. They’re all going to break away from the Western system,” he added.
And now it looks like Andy was right: it appears Saudi Arabia has just issued a death knell to the exclusivity of the petrodollar as we once knew it - the first of several dominoes that needs to fall before the U.S. is exposed financially as an emperor with no clothes.
As I have discussed here previously, the BRICS nations (I’ve added an ‘S’ to the BRIC reference to include the country of South Africa) are now developing their own currency, likely commodity backed, to use in trade. This latest development involving Saudi Arabia may have the Saudi’s looking to use a different currency in oil trade, perhaps this BRICS currency that is being developed.
While this move away from the US Dollar was likely going to happen anyway at some point, recent US policy decisions have motivated the Saudi’s to move more quickly away from the US Dollar. This from “Times of India” (Source: https://timesofindia.indiatimes.com/readersblog/blogthoughts/saudi-arabia-the-foundation-of-brics-currency-47508/):
BRICS is an alliance of the world’s five major developing economies: Brazil, Russia, India, China and South Africa, most people underestimate it since it includes emerging economies as opposed to established economies in the G7. These five countries account for 41 percent of the world’s population and have a combined GDP of over 24.4 trillion U.S dollars. They also have a substantial military capability and an increasing political influence in the global sphere, and by teaming together, this group commands a voice for itself in the global sphere, for example, it helps them to have wiser worries about emerging economies whenever the West implements policies that are explicitly beneficial to itself, and a famous example of this is the carbon tax. The European Union routinely complains about the carbon emissions created by the Indian and Chinese steel industries. Because their industries are adopting to clean energy, they are now going to apply a carbon tax, so that when Indian and Chinese steel enter the global marketplace in 2030, Indian products will be taxed penalties precisely because of more carbon emission than these developed countries. However, developed nations have generated so much carbon during their development phase that they are primarily responsible for climate change, yet they ignore the past and now impose a tax on carbon emission, when developing countries needs economic fuel to thrive.
Saudi Arabia is one of the most powerful nations in the world, and it has always been the closest ally of the United States of America. However, Saudi Arabia is currently involved in a cold war with the same United States, because Saudi Arabia reduced oil output by 2 million barrels a day as a result the price of oil shot off from 91 dollars a barrel to 94 dollars a barrel, this action was tremendously profitable to OPEC, but it caused mayhem in the West. Further, President Biden warned Saudi Arabia with unclear repercussions and even offered passing the No Pick Bill to challenge Saudi Arabia’s security which begin violating the Petro dollar agreement between the U.S and Saudi. So, in exchange, Saudi Prince Mohammed bin Salman made a major step that sent shivers down the spines of Americans, and that was his proposal to join members of the BRICS. Previous years data states that Saudi has started making defence deals with both China and Russia firstly, they are not overly reliant on the U.S, secondly the Biden administration wants to relax economic sanctions on Iran, Saudi Arabia’s opponent in the Middle East, and the third reason is the oil consumption of BRICS. Resulting in Saudi Arabia, the world’s top oil producer allegedly proposing to join BRICS, by which they will have the backing of China, Brazil and India as the biggest consumers of oil in the world.
If you haven’t yet embraced “Revenue Sourcing” for your planning to help you protect yourself from currency risk, now is a good time to do so.
On the radio program this week, I discuss the concept that the US Dollar is debt rather than an asset. It plays perfectly into this discussion. If you haven't yet had the opportunity to listen, click on the "Podcast" tab at the top of this page to listen now.
“A businessman cannot force you to buy his product; if he makes a mistake, he suffers the consequences; if he fails, he takes the loss. If a bureaucrat makes a mistake, you suffer the consequences; if he fails, he passes the loss on to you.”