Professor Elam

4/16/2025

hMarket Watch reports less use of the dollar as a safe haven.

Recall that the US Dollar became the World Reserve Currency in the Bretton Woods Agreement of 1944.

The next big move came in August 1971 when Nixon shock eliminated the dollar convertibility to gold.

The long term result was to allow Congress to inflate the currency. LBJ's $100 B budget is now over $36 Trillion. The $3,500 Chevy  nicely equipped back then is now ten times that figure, and way more for popular SUVs.

the price of gold in the US had been fixed at $35 since FDR's term. It rose over $100 when Americans were allowed to then own gold, today it just passed $3,000.

the Asia Infrastructure Investment Bank kicked off in 2014.

It is clearly an attempt to promote the Chinese Yuan as an alternative to the US Dollar. The market watch article suggest that with tariff threats the world is turning elsewhere for currency transactions. The real reason for the Kuwait war was that Saddam Hussein was cheering for the EU to be used for oil transactions rather than the US Dollar.

If the Dollar lost its status as the world reserve currency it is easy to see inflation taking place in the US with its $36 T total debt.