- US Treasuries’ dominance as global reserves is fading, signaling financial shifts.
- Gold’s return as a neutral reserve asset could reshape global trade dynamics.
- Bitcoin’s rise could accelerate as nations seek alternatives to US debt reliance.
The global dominance of US Treasuries and, to a lesser extent, US stocks, as the primary reserve assets is reaching a turning point. For decades, the US has maintained this financial dominance since the country moved off the gold standard in 1971. The ensuing increase in US debt, rising by 85 times, allowed the world economy to expand.
However, this growth has had uneven benefits. While some Americans profited, many others felt left behind, fueling the political rise of figures like Donald Trump, who attracted those who believe they didn’t share in the prosperity of the last 50 years. The current trajectory suggests that the era of US Treasury dominance could soon be over.
THE END:
— Arthur Hayes (@CryptoHayes) April 5, 2025
Of US Treasuries and to a lesser extent US stocks as the global reserve asset. Since Nixon took the US off the gold standard in 1971, US treasury debt outstanding grew by 85x. The US had to create the credit dollars necessary for the growth in the world economy. This was… pic.twitter.com/sR9p2lwK47
Fall of the Dollar as the Primary Reserve Asset
The US current account deficit plays a key role in this shift. If this deficit were to be reduced, foreign nations would find themselves with fewer dollars to purchase US assets like bonds and stocks. This would create a dilemma for countries around the world, forcing them to take actions to strengthen their own economies.
Consequently, nations may be forced to sell their holdings in US assets to fund their own domestic policies. Even if Trump softens his stance on tariffs, global leaders cannot ignore the risk of him reversing course again. Therefore, the financial dynamics that have governed the global economy for decades may be gone for good.
As nations move towards more nation-first economic policies, it becomes clear that the US will no longer enjoy the same unchallenged position in the world economy. The idea of a dollar-centric global monetary system may soon be a thing of the past. Hence, the shift away from US debt as the dominant reserve asset is already underway, and the world is adjusting to this new reality.
Return of Gold as a Neutral Reserve Asset
Amid these changes, gold is poised to make a major comeback. While the dollar may retain its position as the global reserve currency, countries are likely to shift towards holding gold as a key asset for international trade settlements.
This shift could mark a return to the pre-1971 trade relationships when gold served as the neutral standard. Gold offers the benefit of being tariff-exempt, making it an ideal asset for nations seeking to bypass the disruptions caused by tariffs. Therefore, nations are likely to stockpile gold as a safer and more reliable reserve.
For those willing to adapt to these changes, gold, gold mining stocks, and even Bitcoin offer potential investment opportunities. As the global monetary system rebalances, these assets stand to benefit.
Additionally, the continued decline of US debt reliance could be the catalyst for Bitcoin’s dramatic rise. As more countries look to alternative assets, the path for Bitcoin to reach unprecedented levels, possibly nearing $1 million, becomes increasingly likely.
