Even Australia Is Dumping US Dollars

I woke up this morning to a small news story out of Australia. Their central bank cut the share of US dollars it holds. They cut it by ten full points in one year. Not China. Not Russia. Australia.

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I can't stop thinking about it.

Australia is one of our closest friends. We share our deepest spy secrets with them. Their soldiers fought next to ours in every war since Korea. If you drew up a list of the five countries most loyal to America, Australia would make the cut every time.

And they just quietly walked away from a chunk of our money.

Not one US paper covered it today. I checked. I looked at the Journal. The Times. Bloomberg. CNBC. Nothing. Not a headline. Not an alert. Not a peep on the evening news. The story ran in an Australian financial live blog. That was it. A currency expert on the site said the Aussies were "in good company." That line stuck with me all morning.

Here's what worries me. When foreign banks buy fewer of our dollars, our rates go up. That means your mortgage costs more. Your car loan costs more. Your credit card bill too. Every loan in this country is priced off one number.

That number is the ten-year Treasury. It sits at 4.66% right now. It sets the cost of nearly every dollar you borrow.

Think about what that means at home. On a $300,000 mortgage, one point of rate change is about $200 a month. That is $2,400 a year. Over 30 years, more than $70,000. Real money. Money that never lands in a college fund.

Australia is far from alone in stepping back. Deutsche Bank has been tracking this. Between June and October of this year, gold jumped from a quarter of all central bank money to nearly a third. The dollar's share dropped from 43% to 40%. Three points in four months. That is a big move for something that used to sit still.

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Gold just passed the euro. It is now the second biggest thing central banks own on Earth. Only the dollar is bigger. For now.

Poland used to want a fifth of its money in gold. Now it wants a third. Ninety-five out of a hundred central banks say they plan to buy more. Not fewer. More.

I don't think most people realize how far this has already gone. Back in 2000, seven out of ten dollars in world reserves were US dollars. Today it is fewer than six. The IMF puts it at 56.77% at year end. That is the lowest reading on record.

Gold sits near $4,615 an ounce today. In January it hit $5,597. That was an all-time high.

I keep asking myself why this is happening. And I keep coming back to one date. February 2022.

That was the month we froze Russia's central bank money. About $300 billion. Overnight. Gone from Moscow's reach. It was the biggest financial hit put on one country in living memory.

I get why we did it. Russia had just rolled tanks into Ukraine. But every other central banker in the world saw it too. Every single one had the same thought at the same moment. What if that were us? What if we crossed Washington one day?

They can't say it out loud. So they buy gold instead. Quietly. A little more each month. A little more each year.

And now even our friends are doing it. Not enemies. Friends. The people we count on when the chips are down.

Here is what worries me most. Nobody knows where this ends. Nobody. Not the Fed. Not the Treasury. Not the smartest guy on Wall Street. When the world's reserve money stops being the reserve, the old rulebook goes out the window.

I get it. Gold at $4,615 sounds like a rich man's problem. It isn't. This won't show up in one big scary headline. It will show up in your life. In the letter from the bank. In the number at the bottom of your loan. In the price of milk. Slow. Steady. Everywhere at once.

I keep picturing a room full of central bankers. All of them nodding. All of them selling. Poland. Australia. And nobody in Washington saying a word.

More on this tomorrow.

— American Ledger