Jeffrey Gundlach sounds bearish as he sends up a distress flare regarding US dollar reserve status.
“We are looking at a roadmap that is headed towards the US dollar losing its sole reserve currency status” warned Jeffrey Gundlach.
For those unfamiliar, Jeff Gundlach is the founder of Doubleline, which manages $150 billion of bond investments.
“We are looking at a roadmap that is headed towards the US dollar losing its sole reserve currency status”
In the wake of the pandemic lockdowns, Jeffrey Gundlach sounds bearish on the US economy and the dollar
“The US has enjoyed the status of sole reserve currency globally for decades. And it’s an incredible benefit. We also have the biggest military in the world, which just kind of goes hand in glove with being a reserve currency, I think” said Jeffrey Gundlach.
“But in the aftermath of the lockdowns and pandemic that continues to wear on, the strongest economy in the world, by far, has been the Chinese economy. And the US economy has bounced back with a lot of consumption. A lot of that consumption is going to China. It’s one of the reasons China has such a strong economy” he added.
“The US has enjoyed the status of sole reserve currency globally for decades”
It is the accelerated performance of China that is making Jeffrey Gundlach sounds bearish on the US economy
“What we’re seeing in the US starting to fall behind in economic growth. That’s not a new thing. That’s been going on for a generation– the US falling behind. But the Chinese economy is growing so rapidly that the estimates as to when the Chinese economy will be the largest in the world keep getting pulled forward. 20 years ago, it was thought to be 2050 the Chinese would be bigger than the US, and then it was 2040” said Jeffrey Gundlach.
“China’s made no secret of the fact that they want to be a global player and have at least a seat at the table of global reserve currency status” – Jeffrey Gundlach
“And now, the estimates are maybe it’s in the 2020s– maybe even 2028, the Chinese economy gets bigger” he added.
But it is also China’s ambitions of moving up the top of the food chain, challenging US hegemony on the global stage, which is why Jeffrey Gundlach sounds bearish on the US dollar as the world’s reserve currency.
“China’s made no secret of the fact that they want to be a global player and have at least a seat at the table of global reserve currency status. And they’re spending like crazy on military and have also made no secret of the fact that they want their military to be dominant, maybe the biggest in the world” said Jeffrey Gundlach.
Jeffrey Gundlach also notes China’s huge savings rate and in contrast, the US’s huge debt rate. In other words, China is one of the few countries with the capacity to buy US treasuries.
So, will the two economic military superpowers sit down and play global domination games and form a strategic alliance? But that implies the US conceding unilateral US hegemony, accepting a bilateral world. The alternative could mean the two tribes going to war.
Perhaps Jeffrey Gundlach just answered the greatest geopolitical question of the century, which could also be why Jeffrey Gundlach sounds bearish on US dollar reserve status
“We’re running our economy in a way that is almost like we’re not interested in maintaining global reserve currency status or the largest military or global, call it, a superiority or control” said Jeffrey Gundlach.