A Deadly Serious Attempt to Reset the Monetary Order

The current global monetary system, dominated by the US dollar, has been a subject of criticism for its perceived flaws. Donald Trump’s administration, led by trade guru Peter Navarro, Treasury Secretary Scott Bessent, and Council of Economic Advisers Chairman Stephen Miran, has been working on a plan to address these issues. The key to their strategy lies in the concept of a “reset” of the dollar-dominated monetary and trading order.

Understanding the Current System

The current system is based on the dollar’s role as a global reserve currency, which has been a cornerstone of the US economy since the end of World War II. However, this system has been criticized for its limitations, particularly in terms of the dollar’s limited supply and the potential for excessive spending by the US government. As a result, the system has been plagued by fiscal and trade deficits, which have led to concerns about the dollar’s stability.

Trump’s Plan: Higher Tariffs and Sanctions

The Trump administration’s plan involves using higher tariffs and sanctions to reset the system. The idea is to make the US dollar less competitive and encourage other countries to switch to alternative currencies. The plan also includes the use of income or wealth taxes, which would target wealthy individuals and companies that have benefited from the current system.

Higher tariffs: The US would impose higher tariffs on imported goods, which would reduce demand for the dollar and encourage other countries to switch to alternative currencies.
Sanctions: The US would impose sanctions on countries that do not comply with its economic policies, which would further reduce demand for the dollar.
Income or wealth taxes: The US would impose income or wealth taxes on wealthy individuals and companies that have benefited from the current system, which would reduce the attractiveness of the dollar as a currency.

The History of Imperial Finance

The concept of a “reset” of the global monetary system is not new. Throughout history, empires have used various methods to reset the system, including confiscating enemy or vassal assets, extinguishing debt, and imposing sanctions. The Roman Empire, for example, funded itself by confiscating enemy or vassal assets, while the British Empire used the concept of “borrowing” to finance its colonial expansion.

Empire	Method of Reset
Roman Empire	Confiscating enemy or vassal assets
British Empire	Borrowing from colonies

The US Dollar and the Gold Standard

The US dollar has a long history, dating back to the silver standard in the late 19th century. However, the dollar’s role as a global reserve currency was solidified in the 1940s, when the US emerged as the undisputed winner of World War II. The dollar was pegged to gold at $35 per ounce, and it remained a key component of the global monetary system until the 1970s.

Gold as a Substitute for Fiat Currencies

Gold has long been accepted as a good means of payment and store of value. However, its limitations as a reserve currency standard have been well-documented. The gold standard, which was used in the past, limited the ability of governments to print money or borrow money. This created a hard budget constraint independent of politics.

“Gold is the only money that cannot be printed by governments or mined through cyber machines. If we cannot trust politicians, national governments or central bankers to manage our money, then a transparent gold market will be able to price such fiat currencies that will float against each other and against gold.”

The Shift Out of Dollars

The shift out of dollars has already begun, with central banks reducing their holdings of dollars in their foreign exchange reserves. Central banks have been adding 1,000 tonnes of gold to their reserves for three years running, holding 36,195 tonnes as of January 2025.

Year	Central Banks’ Holdings of Dollars	Central Banks’ Holdings of Gold
2001	71.5%	0
2024	57.8%	36,195 tonnes

The Rise of Gold Prices

The spectacular rise in gold prices to a peak of $3434 per ounce suggests a fundamental de-dollarization, not into other fiat currencies, but into gold. This is a sign that the Trump administration’s plan to reset the system is having an unintended consequence, pushing the system back towards a gold standard.