The Rio Reset and the End of Dollar Privilege 
Phillip Patrick

The Rio Reset is real, it’s happening and it will change our lives in ways that are hard to imagine. Phillip Patrick brings an international perspective to the issue. He explains the privilege most Americans have enjoyed without knowing it – and what happens when that invisible privilege fades…

If you’ve ever seen one of my appearances on Steve Bannon’s War Room, you might’ve guessed I was not born in America.

In some ways, that’s been a challenge (I’ve learned to never ask for biscuits, for example). In some other ways, my background gives me a perspective that many Americans lack.

The hidden privilege most Americans don't even know they have

Over the last 80 years, we’ve benefited from the dollar’s status as the global reserve currency. This "exorbitant privilege," as economists call it, means that our government and our families have been able to borrow cheaply – for mortgages and big-screen TVs, or for disaster relief and defense spending.

We’ve been benefiting from the dollar’s dominance in the global financial system without being forced to make tough choices.

That exorbitant privilege is worth a lot – as much as $800 billion a year. That’s a lot of money – the equivalent of the annual GDP of Poland (or two Denmarks). And this represents money that we can spend without having earned.

The dollar’s global reserve currency status makes this possible. The U.S. is virtually the only nation able to sell government debt globally, to finance virtually limitless deficit spending. (Only German Bunds and, to a lesser extent, Swiss bonds are treated as true safe-haven assets by global investors. But no other nation has the size, liquidity, or reach of the U.S. Treasury market.)

I hope you understand now why this "exorbitant privilege" is vital – and, by extension, why BRICS are determined to challenge it.

How America misused its advantage

Throughout history, global reserve currencies have lasted, on average, about 100 years. That's because the economic pressures that create global reserve currencies contain the seeds of their own destruction.

The dollar’s role as global reserve currency means the U.S. must supply the world with dollars – and the easiest way to do that is by issuing debt. Between nations, currency isn’t just money; it’s a store of value and a claim on future goods and services. In effect, every Treasury bond the U.S. sells is a promise to repay in dollars, reinforcing the dollar’s central role in global trade.

Over the decades, we've abused that privilege:

• Defaulting on the convertibility of dollars into gold
• Then increasing the national debt 90-fold
• At the same time, weaponizing dollar dominance with sanctions and financial censorship

In the U.S. unconstrained spending (especially in response to financial crises, like the mid-2000s Great Financial Crisis and the more recent pandemic panic) lead to inflation – a loss of purchasing power. Outside the U.S. those who own dollars experience currency devaluation instead – their dollars buy less, just like ours do.

You know how unbelievably frustrating inflation is.

Now imagine how much more infuriating it is for other nations, those who must use dollars to buy and sell on international markets, to watch their purchasing power dwindle. 

For decades, the rest of the world has simply tolerated this situation. They didn't like it, of course. That's no secret. For example, Liu Pengyu, a spokesman for the Chinese Embassy in the U.S., commented:

"The U.S. has long used its dollar hegemony to shift crises, spread U.S. inflation to other parts of the world, and made it become a geopolitical tool, which damages international economic and financial stability, and disrupts international order."

Or Dmitry Peskov, a Kremlin spokesperson, who said in December:

"More and more countries are switching to the use of national currencies in their trade and foreign economic activities … If the U.S. uses force, as they say economic force, to compel countries to use the dollar it will further strengthen the trend of switching to national currencies [in international trade]."

But other nations had no leverage, and, crucially, no alternative to the dollar-based global financial system.

The Rio Reset means that is no longer the case. 

The Rio Reset: The world moves on

The reason there was no alternative to the U.S. dollar-based financial system is pretty simple.

The U.S. doesn't just control the dollars – the U.S. controls the financial infrastructure itself (sometimes called "pipes" or "the plumbing") that powers international trade.

BRICS nations are no longer just complaining. For the last ten years, they've been quietly building an alternative global financial system. One that runs on 21st century mainframes, incorporates blockchain technology – and, most importantly – doesn't rely on Western infrastructure to function.

The BRICS have built their own parallel global financial network.

Like an iceberg, the visible portions represent only a tiny fragment of the massive time, effort and money spent to develop them. Today, BRICS have their own version of the World Bank. Of the Fed's central bank liquidity swap lines. Of the SWIFT inter-bank messaging protocol. Central bank digital currencies for international transactions, and settlement-in-commodities contracts let them address trade imbalances with payments in crude oil or gold.

It's important to note these are not theoretical constructs. Every single item on the list above already exists. They've all been tested and used in the real world. 

The Rio Reset is the moment BRICS will take their project public. The "grand opening" of their new, global financial network.

From that moment, America’s "exorbitant privilege" is officially under assault.

“It’s too late: the changes are coming”

On April 28, Ray Dalio (founder of the world’s most successful hedge fund) made an alarming post on LinkedIn:

It's worth reading, but here are the highlights: 

• Dalio confirms what the BRICS nations have long claimed: The dollar-based global order is not just unpopular – it’s unsustainable.
• America’s status as biggest consumer and borrower is ending, and dollar demand is waning. 
• U.S. government debt is no longer considered truly safe.
• He warns the U.S. is being bypassed in world trade. Many global firms are planning for a future without the U.S. 
• This isn’t just about trade! The shift includes capital markets, military alliances and international agreements
• Dalio highlights a systemic breakdown (or “reset”) in currency systems and the international world order.

Make no mistake – the consequences go beyond embassies and corporate boardrooms. The global shift away from the dollar means: 

• Higher borrowing costs for everyone, from the federal government to your credit card interest rate
• Higher prices for imported goods
• Permanent loss of purchasing power (remember, the dollar’s value is based on supply and demand)

Those are just the immediate consequences. Longer-term, I’m concerned we’ll see a permanent decline in living standards. Worse still, we’ll be citizens of a weaker nation – financially and politically sidelined.

We can’t fix this ourselves – all we can do is ensure our families and our financial futures are sheltered from the fallout.

Life without the exorbitant privilege

In my mind, there are four vital things each of us can do right now:

1. Recognize the shift early: denial will be costly in both lost opportunities and permanent loss of purchasing power. 
2. Diversify out of dollars: every dollar along with every asset that’s an IOU for dollars (government debt, savings accounts etc.) will lose value.
3. Consider tangible hard assets like physical gold: global central banks stockpile gold because it’s the best safe-haven store of value in history that doesn’t depend on a government’s promise. 
4. Prepare for a world where economic stability can no longer be taken for granted: establish contingency plans for unexpected developments.

I don’t mean to frighten you – I do want you to take this very, very seriously. As the dollar’s privilege erodes, individual action becomes more important. I believe that, by preparing ourselves and our families to weather the storms ahead, we’re each contributing our little bit to a stronger, more resilient nation.

In Dalio’s words, it’s time to stop thinking and, instead, “deal with these big fundamental changes in the world order calmly, intelligently, and, ideally, cooperatively.”

Remember, America’s strength was never just military or political or even monetary. America’s strength comes from its citizens. From each and every one of us, working together for our own prosperity – we created the world’s most successful nation. That’s something to be proud of!

We can’t change the Rio Reset any more than we can change the course of history. But we don’t have to just sit on the sidelines and watch it happen! We can get a head-start today and lay the groundwork for our own financial stability. 

 

 

Phillip Patrick is a Precious Metals Specialist and a spokesman for Birch Gold Group. He was born in London and earned a degree in politics and international relations at the prestigious University of Redding. He spent years as a wealth manager at Citigroup in London’s Wall Street before taking his current position with Birch Gold Group in 2012. In addition to his articles on the Birch Gold website, Phillip regularly publishes articles on Newsmax. You can also follow him on Gettr.

 

www.birchgold.com