Crashing US Savings Rate Portends End of Dollar as Reserve Currency

I have documented the relationship between savings, growth and household net worth here and here. I bring this up because the latest net national savings rate for the U.S. shows a savings rate of just 1.3% of gross national income (GNI is just slightly different from GDP). Savings is the driver of both growth and wealth creation. If one judges by the increase in US household net worth over the past couple of decades, it would seem as if the U.S. is creating wealth like crazy, maybe amounting to 25% of GDP per year over the period. This figure hit 35% last year.

The problem is that GDP growth and savings amount to only a small fraction of the wealth creation numbers, and over time these must be equal. Perhaps just one fifth of wealth creation in the US has been backed up with savings and output growth over the past two decades. In short, the dollar isn't backed up by enough goods and services.

There is a paradox that results from one country issuing the reserve currency, it will become overvalued. This happens because people outside the country that issues the reserve currency will want to hold some, driving up its value. This will make businesses in the reserve issuing country uncompetitive. Recession will follow. To fight this, the Fed always prints new money and drives down interest rates. This has the perverse effect of pushing the savings rate down even further while driving up asset prices. We can see by looking at the graphs showing the secular crash in savings versus the massive levitation of net worth. This makes no sense. The gap between savings + growth and net worth gets ever larger. The dollar is a bad bet as there are few resources to back up all of the claims that dollar holders possess.

It has been clear to me for years (see here) that the Ponzi type structure of the dollar combined with the weaponization of money would lead China and Russia to attack the dollar's reserve status. Well, China isn't even couching their language any longer. Zerohedge reports:

The Global Times, the unofficial mouthpiece of the Chinese government, printed a remarkable story from one of its editors highlighting the petroyuan and its potential to topple the US dollar as the global reserve currency.

The ledger associated with the dollar is completely broken, and China and Russia understand this. Bitcoin (and to a lesser extent gold) is a better ledger of value (money) than the dollar and other fiat currencies and should benefit.

Notice: This is not investment advice. These are solely my opinions and they may be wrong.