Death of a Reserve Currency
We enjoyed reading this study on the decline of the Dutch florin in the late-1700s and its loss of “reserve currency” status. This discussion is timely given the recent surge of inflation in the developed world as well as the potential ramifications of U.S. sanctions against Russia, which cut off the country from its hard currency foreign-exchange reserves. While the effectiveness of these sanctions as economic warfare against an enemy state is undeniable, it also sends a strong message to the world that it is no longer safe to keep your savings solely in U.S. dollars. We do not think the U.S. dollar is guaranteed its place as the world’s reserve currency forever. We prefer to own productive assets that can generate returns in a variety of macroeconomic environments.