All fiat currencies eventually die. Even some of history’s strongest fiat currencies have died out.
The Dutch guilder, Europe’s reserve currency in the 17th and 18th centuries, collapsed in the 1780s. The guilder survived until 2002, when the Netherlands joined the Eurozone. However, by then, the guilder was merely a national currency.
Similarly, the French franc, Italian lira, and Spanish peseta disappeared in 2002 when the European Union introduced the Euro. Spain, France, and Italy adopted the Euro because their currencies were worthless.
Are Central Banks Preparing for the Dollar’s Death?
Consequently, Americans will wonder how safe the dollar is and if the dollar can last beyond 2030. The U.S. dollar is the world’s reserve currency, the fiat currency most used for international transactions, so its survival is probable.
However, officials at the central banks of Chile, Indonesia, Malaysia, Singapore, Hong Kong, and China fear a dollar collapse. Those banks have organized the Renminbi Liquidity Arrangement, a pool to finance international trade in the Chinese Yuan. Renminbi is another name for Yuan.
The Bank of International Settles (BIS), a bank for central banks in Basel, Switzerland, is organizing the Renminbi Liquidity Arrangement to create a dollar alternative. The existence of the arrangement will convince some people that the dollar is unreliable.
How the Dollar Could Die
History is full of currency collapses and crises. A currency crisis is a sudden drop in a fiat currency’s value.
Currency crises develop because people lose faith in a nation’s currency. For example, countries often suffer currency crises when they lose wars, or in periods of civil unrest. Historically, the faith in the dollar has been high.
However, recent events have caused some foreign observers to doubt the United States and the dollar. The Jan. 6, 2021 riot at the U.S. Capitol and the George Floyd riots in the summer of 2020 convinced many people that America is unstable. The U.S. government’s inept response to the coronavirus pandemic, and the clumsy exit from Afghanistan, have some people doubting America’s capabilities.
A Crisis of Faith
In the worst-case scenario, a currency can lose all of its value and collapse completely. Such collapses can lead to hyperinflation when it takes millions of units of currency to buy groceries or pay utility bills.
Any crisis of faith could strip the dollar of its reserve currency status. A significant crisis of faith could destroy the dollar completely.
To explain, the only value fiat currencies have is the faith people put in them. People use the U.S. dollar because they think it will always retain value. However, if people think the dollar has no value, the dollar will lose its value.
People have faith in the dollar because of the military power and stability of the United States. If the United States becomes unstable, or if a crisis exposes U.S. military power as weak or useless, the dollar could lose its value.
How Taiwan Could Destroy the U.S. Dollar
The British pound sterling lost its reserve currency status because of Nazi victories at the beginning of World War II. In particular, the fall of France and the German blitz against London in 1940.
The U.S. dollar only became a reserve currency because of the American victory in World War II. Thus, any event that casts doubt on American military power can weaken the dollar.
One event that could fatally weaken the dollar is the Chinese conquest of Taiwan. U.S. leaders have staked America’s reputation on their nation’s ability to protect Taiwan from the People’s Republic of China. Notably, the U.S. Speaker of the House Nancy Pelosi sparked a crisis by making an official trip to Taiwan.
A Chinese conquest of Taiwan would make the United States look weak and destroy faith in the dollar. Another event that could weaken the dollar could be a Russian victory in the Ukraine War, which looks improbable because of the incompetence of the Russian military.
The failure of any American military adventure anywhere in the world could be fatal to the dollar. Americans need to worry about such failures because US leaders are getting more aggressive and warlike. Notably, Pelosi went to Taiwan to offend the Chinese, and President Joe Biden openly backing the Ukrainian War against Russia.
A Dollar Death
American leaders’ aggressiveness could lead to a military crisis that destroys the dollar. History shows, that a combination of violence in the United States and a military crisis abroad could be fatal to the dollar.
The Dutch guilder lost its reserve currency status after the Dutch Republic lost the Fourth Anglo-Dutch War to the British Empire in 1784. After the Fourth Anglo-Dutch War, the Dutch Republic collapsed completely during the Patriot Revolution. The Patriot Revolution was a long period of civil unrest and political warfare that only ended when a Prussian army occupied the Netherlands.
History shows even the strongest currencies can suffer a total collapse. Thus, the death of the U.S. dollar by 2030 is possible.
Consequently, smart Americans will invest part of their income and savings in dollar alternatives such as gold, silver, and cryptocurrencies. In today’s world, everybody needs to understand that the death of the U.S. dollar is a real possibility.
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