Russian and Chinese Deal Prompts Question: Is This the End of the U.S. Dollar?

Last week Russian and Chinese financial representatives made a historic deal which will allow them to bypass the United States dollar completely and pay each other in their respective domestic currencies. This deal, called the “Agreement on Cooperation”, is symbolic of a significant trend among the finance sectors of emerging economies to reduce their dependence on the dollar as method of reshaping the long held and current financial and geopolitical world order. Moves such as this one suggest that prudent individuals may want to turn to alternative sources of wealth storage in order to protect their holdings in case of the end of the U.S. dollar.

This Agreement on Cooperation was signed in the presence of the presidents of both countries—President Xi Jinping of China and President Vladimir Putin of Russia, and was followed the next day with the announcement of a natural gas deal between Russian and Chinese companies. Putin called the deal “a new historic landmark” and spoke of its importance.The U.S. dollar is a form of fiat currency, which means that it has no inherent value, being only paper with words printed on it. It is demand for the dollar that makes it valuable, and it is demand for the dollar that has allowed the United States government to borrow seemingly unlimited amounts of money and spend beyond its means. This has resulted in tremendous national debt for the U.S.

However, other countries, particularly those with emerging economies, including Brazil, Russia, India, China, and South Africa, have engaged in deals and practices that are diminishing their own dependence on the U.S. dollar, thereby reducing global demand for the dollar. As this trend grows, the U.S. dollar becomes more and more in danger of losing its valuable position in the global economy.

Could this mean the end of the U.S. dollar? Some say yes. Those who believe that these trends will continue and desire to protect their wealth against devaluation of the U.S. dollar might want to look into gold and silver prices. The choice to store wealth in the form of precious metals is becoming increasingly common. Precious metals can provide a sort of safe haven against currency devaluation or fluctuation—regardless of what happens to the U.S. dollar in the next few years, gold and silver will always be valuable resources. Well-known American investor, businessman, and author Robert Kiyosaki (of the Rich Dad Poor Dad series of books and other financial material) emphasizes to the public the importance of becoming financially literate in order to protect their own investments and make intelligent financial decisions. Not everyone needs to have a degree in finance or economics, but it is wise to understand the basics about fiat money and the benefits that investment in gold, silver, and other precious metals can provide for an individual’s economic wellbeing.

The Russian and Chinese Agreement on Cooperation is just one event in a string of events that indicate a trend. That trend is the devaluation and decline of the U.S. dollar. Will it result in the end of the dollar? Perhaps. But one way to avoid risk altogether is to look further into transforming cash holdings of fiat currency into real holdings of precious metals.