We say – “Bunk.”

Argentina has been marked by an ongoing economic crisis including a sharp devaluation of the local currency and annual inflation of more than 100% highlighted by a steep drop in agricultural exports due to a severe drought. It’s also planning to hold elections later this year.

Argentina is not attempting to de-dollarize, it is in fact desperately trying to hold on to its dollars by paying in any other currency it can. As much as we oppose the perversities of the U.S. dollar system and offer a way for individuals and institutions to get on their own personal gold standard, we also debunk “click bait” articles that confuse more than they clarify with so-called catchy but meaningless headlines. Now is the time for actual solutions, not misleading articles.

The dollar system is fatally flawed, and on shaky ground (see First Republic Bank) but that does not mean it will crash tomorrow, the same way that California will not drift into the Pacific Ocean tomorrow despite its history of earthquakes.

Before going any further, we should note that the headlines say that Argentina “plans” to do this.

The Unpopular Truth

Argentina wants to pay in Yuan to slow the outflow of its dollar reserves. Since all currencies are dollar derivatives, losing dollar reserves is akin to gutting the value of your currency.

This story is spun as a good thing for Argentina and a threat to the dollar. In reality, the dollar is holding steady. It is Argentina’s currency that is suffering.

But what if this plan actually happens? What if Argentina does pay for imports with Yuan? What happens then?

Absolutely nothing.

It is not a threat to the dollar.

The reserve currency status of the dollar is not affected in the slightest. The value of Chinese exports is determined in global markets, which use the dollar as their numeraire, the benchmark of monetary comparison.

China can ask for payment in any commodity or currency it chooses but in the end will effectively receive the dollar value of its imports. It’s a dollar world and we’re each living in it although some of us are opting out. The move helps slow the pace of dollars from Argentina, it's economic minister said.

The Only Hope for Argentina

Now what if Argentina actually wanted to switch to an efficient monetary system, get out of debt at a discount and “de-dollarize” without destroying its currency?

Ideally, it would utilize something that isn’t another gold price-fixing scheme like the “any-minute-now” gold-backed ruble. What we’re talking about is moving forward to the gold standard.

Current silver and gold prices are showing fear and uncertainty in the dollar system. Those with dollars realize they are at risk of losing them. Domestically we saw this almost happen with Silicon Valley Bank and Signature Bank. The powers-that- be came to the depositors’ rescue but no one can be certain this will hold true going forward. Now is a time of heightened credit risk. This is not necessarily saying anything about inflation or recession. It’s a statement about the credit environment.

This line of thinking leads to one destination. Gold is the financial asset that does not carry counter-party risk, such as a failing bank or government. Gold can provide an “off-ramp” from unstable interest rates, destabilized banking systems and mad, irredeemable currencies. Gold and silver are money. People (and governments) buy them to avoid credit risk which is high now. Until then, take claims of supposed “de-dollarization” and soon-to-be-implemented “gold-backed currencies” with a rock of salt.
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Keith Weiner is founder and CEO of Monetary Metals (www.monetary-metals.com)