The American Dollar has powered the global economy for the last half century or so. And it’s made the United States the most
powerful nation in the world.
But that may all be soon coming to an abrupt end.
For the last 68 years, the U.S. Dollar has enjoyed a unique status as the world’s reserve currency.
But... for the last 39 years, the US Dollar has been artificially propped up by a “secret pact” made between former US president Richard Nixon and Saudi Arabia.
That pact has made America the richest country in the world. Americans have enjoyed unprecedented wealth as a result.
One problem. The secret pact was non-binding. Either party could walk away without getting in trouble.
As nations start to abandon the agreements made in that “secret pact,” only one outcome will be possible:
The Death of the US Dollar
When the US Dollar dies, it’ll cause the most massive wealth transfer the world has ever seen.
It will affect every person in the world ... no matter what country you’re from.
If you’re prepared, you could end up extremely wealthy.
If you’re not prepared, you’ll likely end up dirt poor. All your hard-earned money will get transferred to someone else.
We’ll give you all the details of the “secret pact” in a moment.
But first, to properly understand why it will be so devastating ... and how YOU can get on the correct side of the wealth transfer ... we have to take a little trip back in time.
So hold on tight. We’re going on crash-course through modern economic history today.
Don’t worry, it’s short and sweet. But it could be the most important ... and profitable history lesson you’ll ever learn.
Let’s start by answering a question many of you may have (but were afraid to ask...)
What’s a Reserve Currency?
A reserve currency is the money central banks hold in their vaults throughout the world. It’s the money other nations use to set the price of their own currency.
And most importantly, it’s the currency that nations use to trade goods among each other...
Like natural resources (oil, copper, timber and grain)... and manufactured goods like cars, electronics, clothing and processed food.
These things get traded throughout the world between many nations.
For the last 70 years or so, most countries have traded their goods with other nations using US Dollars.
Doesn’t matter if it’s Spain trading with Argentina. Or Saudi Arabia with China.
These countries trade with each other using American dollars, because that’s the reserve currency.
So how did the US dollar get this important distinction?
The Rest of the World Eagerly Gave the US Dollar This Status
In 1944, while bombs were still dropping on European soil, leaders from the Allied nations gathered to plan for the end of World War II.
Their goal was to establish an economic system that would help quickly rebuild the war-torn areas of Europe.
At that time, they chose the United States as the most financially stable country.
So in July of 1944, the 44 Allied nations signed an agreement giving the reserve currency status to the United States.
In turn, the US promised to exchange each US dollar for a fixed amount of gold. For each $35 you cashed in, the US Treasury promised to give you one ounce of gold.
This was an advantage to the countries ravaged by war. Europe (and then Japan after the war) needed to rebuild.
They did it by devaluing their own currency against the US dollar. This boosted their exports to America. It created jobs for their citizens and growth in their economies.
It was a great boon for these countries in the post-war recovery. And the US loved its new role as the world’s economic powerhouse.
It all worked reasonably well until the 1960s.
The problem was, the U.S. government was only backing about 25% of its money supply with actual gold. Yet it was promising to redeem every dollar in circulation with real, physical gold.
In the 1960s, some people started noticing the growing discrepancy. One of those guys was the president of France, Charles de Gaulle.
He began emptying French banks of every last US dollar he could find.
Then he plunked the cash down at US Treasury headquarters and demanded gold, citing the 1944 agreement.
The US Treasury had no choice. They backed their trucks up to Fort Knox and began emptying the vaults. They ended up shipping hundreds of tons of gold bars to France.
Other nations took notice... and it started a run on gold in the late 1960’s.
During that time, foreign countries plundered more than 50% of the United States’ gold reserves. A total collapse of the system seemed imminent.
The Nixon Shock
So in 1971, US president Richard Nixon decided to end the 1944 agreement to convert US Dollars into gold.
Dubbed as the “Nixon Shock,” this decree turned the US Dollar into a pure fiat currency.
That means the only thing giving value to the U.S. dollar since then is the promise of the US government. No gold. No nothing. Just a promise. It’s really kind of scary.
And yet, strangely, that move did not hurt the strength of the US Dollar.
In fact, the demand for the dollar only increased.
Here’s why.
The Saudi Arabian Connection
In 1973, U.S. President Nixon and King Faisal of Saudi Arabia signed a pact that created the petrodollar system.
Nixon asked Faisal to accept only US dollars as payment for oil. He also asked him to invest his excess profits in US Treasury bonds.
In exchange, Nixon pledged to protect Saudi oil fields from the Soviet Union and other potential aggressors (like Iraq and Iran).
This “secret pact” created immense international demand for US dollars.
Nations who bought oil needed Amercan dollars to buy it. Nations who sold oil bought US Treasuries to protect their interests.
This petrodollar agreement played a huge part in boosting the dollar's valuation.
But more importantly, it created an almost endless pool of demand for US Treasuries.
This was how countries around the world maintained stores of petrodollars. And international investors looking for a safe haven investment always turned to US Treasuries.
The Tide Is Turning Against the Dollar
Fast forward to today. Countries still do most of their international trade in US dollars.
Why? Mostly because that’s how they’ve always done it. The system is in place thanks to Nixon’s secret pact.
But some countries are questioning the system. If an African country is trading with China, why are they using American dollars as the trading currency?
So over the past few years China, Russia and other emerging powers have been quietly making agreements to move away from the US dollar in international trade.
And nations that dislike America see ditching the dollar as a good way to reduce American influence in the world.
They’re right.
How It Will All Unravel
Many Americans don’t realize that the petrodollar system has given America an unfair advantage for the last half a century.
It’s enabled the U.S. to print as much money as it wants. Why? Because there’s always been a huge international demand for it’s debt (treasury bonds).
But the shift away from the Dollar as the world’s reserve currency is changing that demand.
It won’t happen overnight. Buying US Treasuries is a long-standing habit for many foreign countries and investors.
But once a large country decides to cash in its US Treasuries, it will be like the run on gold that France started back in the 1960’s.
Other countries will start cashing in ... and everyone else will panic and want to do the same.
When that happens, the value of the dollar will plummet. Most likely the International Monetary Fund (IMF) will step in and create a new world reserve currency to stave off a world-wide crisis.
But it will be too late for the dollar.
The US dollar may still survive as a local currency. But it will no longer have the worldwide power and influence it has enjoyed for the last 70 years.
What Will Be the Fallout?
In the United States, there will be massive inflation and high interest rates.
The huge spike in the cost of food, clothing, and gasoline will make the 2008 recession look like nothing more than a bump in the road.
The US government will be unable to finance its debts.
The house of cards, built on the assumption that the world would rely on US dollars forever, will come tumbling down.
It is a scary proposition in many ways. But it’s also a huge opportunity.
How YOU Can Prosper
Recent stories in major financial magazines have warned about the potential death of the US Dollar as the world’s reserve currency.
But they don’t tell YOU what to do about it.
Everything we teach in the Elevation Group prepares you for the inevitable outcome of this story.
The investment strategies we promote in EVG will not only help you survive ... they’ll position you to prosper and come out on top.
See, the death of the dollar will be part of the massive wealth transfer we constantly talk about. It’s setting up to be the most massive wealth transfer in the history of mankind, and we plan to be on the proper side.
Now is a great time to jump back in to the
Members Area and review some of the lessons.
Remember, this is one of the ways you get to “hang out with the rich.” The more you read through the lessons and diaries, watch the videos and listen the interviews, the more you’ll start to adopt the mindset of the wealthy.
If you haven’t gone through
Lesson 1 on the coming wealth transfer recently, that would be a great place to review the HUGE opportunity waiting out there for those who are prepared.
This article is reprinted courtesy of The Elevation Group. To find out more, please visit their website at:http://theelevationgroup.com
