End of The Dollar Monetary System - What I'm Looking Out For
Hi there! Welcome to one of those my boring write-ups. In this episode, I want to convey what I think will be immediate signs that show the dollar monetary system is about to end. I'm not one of those pessimists out there, but I can be rational and recognize a problem when I sense and see one.
As much as I love the dollar system, I have to acknowledge its downsides. We've generally enjoyed no major wars like the First and Second World Wars, thanks partially to the dollar system, which has enabled some bad actors to be kept in check. This has meant the dollar has been weaponized to get some tyrants to behave. Of course, this came at a cost, as countries gradually sought ways to reduce their dependence on the dollar for trade over time. Take a look at Figure 1
When I began studying money, it didn't take me long to read about the removal of dollar convertibility into gold in August of 1971. Initially, I saw how this led to the massive growth and expansion we have seen since then, as it introduced, or should I say, accelerated something called credit/debt. With it, we have been able to fund our economies into what they are today. As I continued to study money, I soon realised that going into constant debt as an individual to fund one's lifestyle is not sustainable. This is no different for governments, even those that are privileged enough to print their own currencies. The problem with debt is not that you have to pay it back, but that you have to pay it with interest. For the dollar system, the US government has been going into debt for so long that the interest it now pays on its debt stood at 13% of the Federal expenditure in the fiscal year of 2024. Let's say you have $100000 to spend in one year, $13,000 already goes into paying just interest on the money you owe to people. Imagine paying that and then paying the principal amount. Now you have less money to spend on yourself and your household.
Figure 2. Alarming US debt interest payment.
This is where I prophesy haha. You see, I had a friend who always borrowed, and it got so bad that he usually had no money left after paying off part of his debt. You could tell by how he was unable to cater for himself and his house. Now, the US spends on infrastructure, social security, Medicare, etc. These are things they must cater to. A time is coming when they will start refusing to pay for some of these. Major projects will begin to see fewer budgets. Rationing will occur with social security and Medicare, as some will be booted out. When the US starts failing to take care of the basics for its household, you will see this evident around you. I have oversimplified this because it takes numbers to see this, and most don't see these numbers. One place where failure in a government shows up early is the yield demanded on that government's long-term bonds. When investors are not confident in a government, they demand higher interest on that government's longer-term debt/bonds. This is the first place you go to see what money is doing in this current credit/debt-funded economy. Rome was the first empire to issue paper money backed by gold, but over time, it issued more money than it had gold, which ultimately led to its downfall.
The US already played this card long ago, and since its politicians cannot agree on cutting social security, Medicare, military spending, capital hoarding (failure to arrive at appropriate taxation), etc, they are bound to continue to borrow (issue more debt/bonds) and pay an ever-increasing interest on that debt. If you must come away with anything I have written, it is this: the interest will keep increasing, and this will deplete available resources for other aspects of the economy. God forbid another pandemic comes around and they are forced to print more money again. What is happening can be delayed, but it cannot be stopped. Keep your ears and eyes on the rate of increase in the interest payment on US debt. As this interest increases, we go closer to the apocalypse. I think the US is too unique as a nation that has ever existed on Earth and will be able to continue to lead even if the dollar ever collapses (reasons for this thinking are worth another topic and discussion), and I believe they will figure it out and come out on top. For what I'm doing, I'm just living my life, buying some bitcoin in satoshis. Gold is God's money and will continue to prevail when the world needs to come to its senses. So I never bet against gold.
Money is an interesting topic, and I recommend you study that topic carefully and start by reading this (https://www.achaetiendem.com/2022/12/why-do-you-find-talking-about-money.html).
Thank you for sticking with me till this point.
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