Last week Rogue Money published an article predicting the outlook for the dollar in 2017 as remaining the singular global reserve currency. Now we will see the numbers which validate that foreigners are bailing on that reserve in record numbers.
Through October of 2016, more U.S. dollar reserves (Treasuries) were sold than bought for the 12 months going back to the same month in 2015, with an unprecedented three quarters in a row now, or seven total months that do not include November and December yet, showing a decline.
The decline in nation’s wanting to hold dollars is two-fold… with economic uncertainty being the primary cause for some selling their dollars to bolster their own currencies. And as more and more countries find opportunities to move away from reliance on the dollar because of the rise of bi-lateral trade, others are exchanging their dollar reserves for currencies like the Renminbi, which in 2016 crossed a critical mass point where they now have over 100 economies trading directly with them and without the need for a reserve medium of exchange.
Over the past few months the dollar has strengthen primarily because the Fed has mopped up hundreds of billions of dollars worth of dumped Treasury Bonds without these dollar based instruments actually reaching the open market. This has given the illusion of a smaller monetary base, and that naturally leads to a stronger currency. However, if the trends of the second half of 2016 continue into the new year, or increase sharply as more and more countries rush to the door to get rid of their dollars before they become even more devalued, then the U.S. economy is in for a major shakeup since the only thing propping up the power of American hegemony is their right and force of will in being the singular controller over the medium of exchange for the global financial system.