Global Creditors Leave The Dollar. Central Banks Continue Buying Gold.
Holdings of US assets by the largest dollar creditors have fallen at an accelerating rate over the last 2 years.
Is this a signal that the current US Dollar based monetary system is falling out of favor internationally? Where would that capital go?
None of the current paper alternatives to the dollar seem very reliable. Indeed any form of paper money seems to have issues if we look at long term history.
For the last 7 years Central Banks have noticeably returned to net accumulation of gold as a primary alternative. There does seem to be some genuine concern about the state of global monetary management, despite the constant public reassurance otherwise by the central banks themselves.
The chart below shows that central banks have noticeably switched to net accumulation of gold for the last 7 years in a row.
Certainly, China’s accumulation has been substantial. This is clearly a purposeful allocation decision.
Clearly, there are some major shifts taking place. US investors might find it worth considering the extent to which their investment assumptions implicitly assume a durable continuation of the dollar standard.
If the central banker’s consistently disparaging statements about the relevance of gold seem disingenuous, given their own activities, then it could be worth seeking a different viewpoint. From Josh Crumb, founder of Goldmoney, for example.
Then … Grant Williams has done a great job in putting together a highly entertaining, as well as informative, journey through the puzzle of international finance, and looks at some of the growing incentives, that are undermining the stability of the current dollar standard.
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