On September 18th in the year 324 AD, Constantine the Great, aged 52, achieved a momentous victory that had consumed two decades of his efforts: the attainment of absolute control over the Roman Empire.

At that juncture, the Roman Empire had endured over a century of relentless upheaval—economic downturns, hyperinflation, invasions, humiliations, and unceasing internal strife, among a litany of formidable challenges.

Following his triumph over his remaining political adversaries, Constantine was poised to initiate much-needed reforms. Among his initial imperatives was the restoration of shaken confidence in the currency.

His predecessors had significantly debased Rome’s coinage to almost absurd proportions; for instance, the purity of silver in the denarius coin had plummeted from 98% to a mere 5%.

Trust in Roman currency had eroded drastically. Consequently, Constantine turned to gold as a means of reinstating faith.

The solidus gold coin, first introduced by his predecessor Diocletian in the early 300s, had previously failed to gain widespread adoption. However, Constantine selected the solidus as the gold standard for Roman currency, minting substantial volumes for circulation throughout the empire. Notably, he standardized the coin’s weight and purity, a standard upheld for centuries.

Indeed, the stability of the solidus was so pronounced that it eventually garnered global recognition for facilitating trade and commerce, from the Mediterranean to the Silk Road.

By the 500s AD, the broad embrace of the solidus became a source of imperial pride. One emperor proclaimed that the solidus was “accepted everywhere from end to end of the earth,” lauding it as “admired by all men in all kingdoms, because no kingdom has a currency that can be compared to it.”

His assertion was on point—solely the solidus held such universal acceptance for international trade, reminiscent of the present status of the US dollar.

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The solidus enjoyed an extraordinary era of dominance spanning centuries. However, as the Roman Empire, later known as the Byzantine Empire, descended into decline, subsequent emperors once again commenced the devaluation of the solidus.

Over the course of approximately thirty years in the mid-11th century, the solidus forfeited nearly two-thirds of its value.

This epoch coincided with the rise of other European powers, prompting these external realms to seek alternatives.

Soon, prosperous Italian city-states like Venice and Florence began minting their own coins—the ducat and florin. Swift acceptance of these coins in international trade permanently displaced the Roman solidus.

Consistently, it has been contended that the fate of the US dollar might parallel that of the solidus since the establishment of Sovereign Man.


Back when these lines were penned eleven years ago, the notion of the dollar losing its reserve status sparked controversy. Today, these predictions are no longer contentious and are substantiated by daily news headlines.

Especially, the potential decline of the dollar as the paramount global reserve currency is now a mainstream topic, openly deliberated worldwide.

(Of course, the Federal Reserve and the US Treasury Department steadfastly disregard the risk.)

What does the future hold? Does relinquishing reserve status equate to the dollar’s extinction?

Certainly not. At this juncture, the idea of the Chinese yuan becoming THE preeminent reserve currency isn’t necessarily advocated.

China unquestionably wields substantial influence in global trade and boasts one of the world’s largest economies. They possess stature. They wield power. And presently, they can induce numerous trading partners to adopt the yuan in trade.

Consider this: Australia currently exports approximately $150 billion annually to China. Presently, much of this trade is conducted in US dollars—primarily because the US dollar still reigns as the predominant global reserve currency.

Hence, central banks in both China and Australia must accumulate significant sums of US dollars to facilitate this trade. This extends a MASSIVE advantage to the US economy; the rest of the world essentially invests in America by necessity.

Now, imagine if China insists on denominating all trade with Australia in yuan, rather than dollars. Australia would naturally wish to avoid alienating its key trading partner and might willingly concur.

What does this translate to in practical terms? Australia conducts its exports to China. Instead of receiving $150 billion in US dollars, they receive $150 billion worth of Chinese yuan.

How would Australia employ all that yuan? Options are limited. China maintains a tightly regulated economy featuring strict capital controls. Funds can’t flow freely into and out of China.

Australia does, however, import roughly $70 billion from China each year. Therefore, the simplest path involves paying for these Chinese imports using their newfound pile of yuan.

Nonetheless, this still leaves around $80 billion worth of surplus yuan. Since investing this capital in China proves challenging, Australia must identify a solution.

One potential resolution entails Australia’s central bank exchanging excess yuan for gold. Gold traditionally represents an asset central banks have long held. It serves to settle debts and trade accounts or merely as a reserve.

What might this signify for the gold price? The arithmetic is relatively straightforward. In 2022, China’s global trade surplus stood at nearly $900 billion.

As China persists in urging its trading partners to embrace the yuan, should even 20% of this trade surplus convert to gold, the current supply-demand fundamentals could conceivably propel the gold price to $5,000.

This subject will be examined in more detail in forthcoming correspondences. For those contemplating strategies to hedge against the risk of the US dollar’s declining dominance as the world’s reserve currency, gold offers a robust starting point.

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