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The End of the Line for King Dollar?

May 9, 2025, 5:02 p.m. IST

There was a time when Warren Buffett thought gold was a waste of good storage space. Now, he holds $348 billion in cash and is openly worried that the very thing backing that pile, the US dollar, is, to use his phrase, “going to hell.”

We should all pay attention when the man from Omaha gets nervous. Buffett doesn’t panic. He doesn’t bluster. He calmly observes. And what he sees is a country gorging itself on debt while fiddling with fiscal policy like it’s a toddler with a box of matches.

It’s fashionable, especially among financial traditionalists, to dismiss fears of the dollar’s decline as tinfoil-hat territory. But lately, there are a lot more hats out there, and for good reason.

Trump, Trade, and the Torching of Credibility

Buffett’s concern about the dollar is rooted in fiscal recklessness, something that transcends party lines but has been particularly flamboyant under Trump. Despite his bluster about budget cuts and swamp-draining, Trump spent like a sailor on shore leave: tax cuts, trade wars, tariffs, and an economic policy that veered toward untested brinkmanship, prioritising political optics over long-term fiscal discipline.

And now, as Trump bulldozes his way through his second term, markets are watching as his instincts – protectionist, interventionist, transactional – once again put the dollar’s credibility at risk. The idea of retaliatory tariffs backed by potential debt monetisation isn’t economics, it’s weaponised fiscal policy.

Meanwhile, other players are quietly rewriting the rules.

China, SAFE, and “Agile Manoeuvring on a Tightrope”

Beijing, via its foreign exchange regulator SAFE, has been slowly slinking away from Treasuries. They haven’t shouted it from the rooftops, but they haven’t needed to. Between January 2022 and December 2024, China trimmed its official Treasury holdings by more than 27%. That’s not a fluke. It’s a message.

And where is that money going? Some of it into agency debt like Fannie and Freddie bonds, some into private equity, and yes, some into gold. Chinese central bankers have become understated gold bugs, accumulating quietly but consistently, preferring to let the numbers speak. Since late 2022, their gold reserves have jumped 18%.

Why Gold Is Now the World’s Go-To Escape Plan—And How You Can Join In

Why? Because they’ve been watching. Watching Russia get its dollar assets frozen, watching the Fed become the de facto central bank of the world via swap lines, watching the White House toy with the idea of default-by-stealth. And they’re concluding, rightly, that holding US debt now means assuming geopolitical risk.

The Dollar Isn’t Dying, But It Is Ageing

Let’s not get ahead of ourselves. The dollar is still dominant. It still makes up nearly 60% of global reserves. And when the excrement hits the fan, people still flock to Treasuries. But the cracks are there.

The IMF’s reserve data shows a slow, steady decline in the dollar’s share. It’s not a collapse, it’s erosion. And as empires past could tell you (if they hadn’t collapsed under their own hubris), erosion is the quiet killer.

What we’re seeing is not a currency being toppled, but one being gradually diluted. This is de-dollarisation by 1,000 cuts: a bond portfolio trimmed here, a few more gold bars there, a bit of trade done in local currencies, a new euro bond issue in Riyadh. Nothing dramatic. Until it is.

The Successor Problem

So what comes next? The euro has credibility but no cohesion. The renminbi is too controlled. Stablecoins, some may hope (!)  especially with the new GENIUS Act making the US dollar the spine of the digital realm.

But here’s the kicker: it may not be about what replaces the dollar. It’s about what fills the vacuum while we figure it out. And that vacuum will be messy. Power struggles aren’t elegant, they’re chaotic. Just ask anyone who’s tried to exit a WhatsApp group gracefully.

And this isn’t like past transitions. The idea that currencies rise and fall every century or so is tidy, but it’s mostly a myth. The dollar’s role isn’t just about what currency is most accepted in trade, instead it’s about the United States’ willingness to absorb the world’s savings. Past reserve currencies didn’t have to do this. Sterling in its heyday still had to anchor itself to gold. Mexican silver may have been trusted, but it didn’t finance the world’s capital imbalances.

The dollar does. And that is the heart of the problem.

For decades, surplus countries from China to Germany have dumped excess savings into the US. In return, America exported stocks, bonds, farmland, commercial real estate, and other assets. In theory, this helped capital flow to where it was needed. In practice, it hollowed out US industry, inflated asset prices, and entrenched a global system where everyone relied on the dollar because it was the only pool deep enough to absorb those flows.

But this is starting to change. The US may soon tire of being the world’s shock absorber. Or the rest of the world may stop trusting the arrangement. Either way, the system isn’t evolving, it’s fraying.

And when that system breaks, we won’t just switch from dollars to euros like changing taxis at a rank. We’ll be stuck in a traffic jam with no taxi at all.

Gold: The Disinterested Sovereign

Gold isn’t going to replace the dollar. But it doesn’t need to. That’s the point. Gold doesn’t require central banks, fiscal policy, or geopolitical good behaviour to retain its value. It’s the outsider asset, the one that doesn’t need a system to give it meaning.

In a world of declining trust and rising volatility, gold is refreshingly indifferent. It doesn’t promise yield, it doesn’t need validation. It just is. And that’s why it matters.

As we enter what could be a prolonged interregnum between monetary orders (a sort of financial dark age where old certainties are questioned but new ones not yet agreed upon) gold becomes more than a store of value. It becomes an anchor.

Warren Buffett may still think gold doesn’t produce income. But when the thing that does produce income is held in a currency that’s “going to hell,” income isn’t the only metric that matters.

Sometimes, wealth preservation is a good return.


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