In 1995, Motorola introduced the world’s then-smallest cell phone. It was a sleek clamshell design. It beat the pants off the competition. It was called, “StarTAC.” Leading up to this cool unveiling, Motorola had 50% of the global cell phone market. The only problem with StarTAC…no one wanted it. The newly-designed phone used analog technology just when the market turned to digital.

According to Roger O. Crockett, who closely covered the company for Business Week, one of Motorola’s senior leaders dismissed the digital threat: “Forty-three million analog customers can’t be wrong.”[1]

In his book, [How The Mighty Fall], Jim Collins identified the first stage of a great company losing its greatness as “Hubris Born of Success.” When I first read his book, I had to look up the meaning of hubris: “excessive pride or self-confidence.” Collins says successful companies can get cocky. They think they can’t fail. They lose sight of the competition. They think they will always hold their market share. This is the first move toward the dustbin.

Four years after introducing StarTAC, Motorola was hanging onto just 17% of the world’s cell phone market. In 2012, Google bought Motorola’s phone business and sold it to Lenovo two years later. In 2016, Lenovo began to phase out the Motorola name.

Can the same thing happen to countries? Is it possible political leaders can get so cocky they fail to properly assess risks? Could this excessive pride and self-confidence lead to political decisions which tick off other countries? Could such a hubris-driven country be left behind as the world moves forward? I’m going to take a wild guess: “Yes!”

Jim Rickards tells the story of being at the Pentagon while presenting his anticipation of a monetary change and the dollar losing its reserve currency status. Seated two chairs down from him was a high-level official from the Treasury Department. This person blurted out, “What are you talking about? The dollar is the reserve currency and it will always be the reserve currency!!” Can we say, “Hubris”?

How is it possible a person who has worked his way up the hierarchy of the U.S. Treasury Department does not know the history of money? The average lifespan for a fiat currency is 27 years. [2] One currency in 1948 and another in 1994 lasted only one month. [3] They crashed-and-burned through hyperinflation; a flash-in-the-pan. (If you want to learn more about the history of money, here is your first lesson: [Where Does Money Come From? – Hidden Secrets of Money Ep 5].)

Let’s call our Treasury official, “Bob.” Bob must not know the U.S. had four currency failures before 1900 and two since then. Before 1900, the Colonial dollar, Continental dollar, Confederate dollar, and the Greenback were the casualties of money printing. [4] Not learning our lesson, in 1933 the dollar ceased to be a receipt for gold stored at the bank. Through an executive order, President Roosevelt made it illegal for citizens to own most forms of gold and the dollar could no longer be redeemed, by citizens, for gold. Fast forward to August 15, 1971, and another executive order ended the ability of foreign governments to exchange dollars for U.S. gold. This was a default on the 1944 global monetary agreement signed at Bretton Woods. [5]

Since 1971, the dollar has been just a piece of paper. The government has declared it valuable. Apart from that fiat, it would have no value. It doesn’t even make good toilet paper.

In 1965, we debased our coinage. Today, a silver dollar used in 1964 is worth $13.80. The newly-minted Presidential dollar coin is worth $0.05; [6] but, it is declared to be worth $1. Someday, it won’t be.

So with a historical lifespan of 27 years for fiat money, the dollar is pressing its luck with the 46th year of its use (since 1971). Like all other fiat currencies, someday the dollar will be swept into the dustbin of monetary history.  But, isn’t this time different? Won’t the dollar always be the reserve currency, as Bob said?

Bob is probably too busy to track these foreign developments:

Like thinking, “43 million analog customers can’t be wrong” the U.S. is blind to the upcoming global monetary change. [IMF Managing Director, Christine Lagarde, calls it an “economic reset.”] European financial commentator Willem Middelkoop calls it [“The Big Reset.”] Middelkoop thinks this is coming soon.

For Americans who are not prepared, the next monetary reset will dramatically change their lifestyle. Even money in the stock market won’t protect its purchasing power. Without the reserve currency status, there will be more dollars around the globe than are needed. This surplus in dollars will mean they will be worth less, not necessarily worthless. Just like a bumper crop of oranges lowers the price of OJ, the purchasing power of a currency functions like a commodity. The Federal Reserve has created a bumper crop of dollars.

Since 2013, I’ve been thinking this big reset would occur in 2018, 2019, or 2020. It would appear we’re right on track for this time frame. Get ready. Learn more about it. Don’t be like Bob.

 

“Dollar” Bill is a real guy, with real knowledge on our nation’s financial calamity, and real solutions for what must be done to dig ourselves out of the hole we are in. Due to his career, Bill must remain “disguised” to protect his position. “Bill” loves America, sees the impending cliff we are all headed towards, and hopes that by sharing his inside knowledge of the failed monetary policy in our nation, that a fiscal “nuclear” event can be minimized.