(Kitco News) - The U.S. dollar is moving away from monetary stability and towards "an unhinged paper currency," according to Dr. Arthur Laffer, founder and chairman of Laffer Associates and former economic advisor to President Reagan and President Trump, who says time is running out to reverse this trend.
"What we have in the world economy over the last 25 years is what I call a period of economic senescence," Laffer told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News. "The world's growth rates have declined dramatically."
This decline becomes dramatically apparent when seen through the lens of gold and Bitcoin prices.
"The dollar is not doing well at all. It's shown by the price of gold. The price of gold is $2,400 an ounce, and Bitcoin is around $50,000. That's a huge increase in the price of alternatives," he said. "All of these are signs of senescence, of weakness, of fleeing the government policies. The only way of getting around this is with a radical revolutionary economic set of policies."
For Laffer's insights on what kind of radical revolutionary economic set of policies are required, watch the video above.
Laffer is known for his efforts in helping the Reagan administration tackle inflation in the 1980s. He later served as an economic advisor to former President Donald Trump. Laffer is also the father of supply-side economics and the Laffer tax curve.
'We're in a new period of the collapse of the U.S. dollar'
Laffer pointed out that the U.S. dollar has made itself as unattractive as possible to world transactions, warning that the greenback will be removed as the world reserve currency if the trust in the USD is not restored.
"We're in a new period of collapse of the U.S. dollar, and it's quite frightening. What will take its place is still up for grabs," he said. "People are moving into all sorts of alternatives to the U.S. dollar … Maybe Bitcoin, maybe gold, maybe some other set of currencies, but that is the direction we're headed."
This is backed by the Atlantic Council's Dollar Dominance Monitor, which shows that the share of the U.S. dollar in global reserves has fallen from 72% in 2002 to 58% in 2024, which is a loss of 14% in the last 22 years.
The de-dollarization trend has been at the forefront of former President Donald Trump's election campaign. In Trump's "20 Core Promises to Make America Great Again," released this week, he pledged to "keep the U.S. dollar as the world's reserve currency."
In a speech last month at the Bitcoin Conference in Nashville, Trump also promised to create and maintain a strategic national Bitcoin reserve, adding that if elected, he would never sell the government's seized Bitcoin.
Laffer added that one of the main problems is the need for more sound money. "There's nothing that can bring an economy to its knees quicker and faster than unhinged paper currencies, and those unhinged paper currencies lead to high interest rates, they lead to high inflation, they lead to a huge expansion of the Fed's balance sheet," he described. "We are moving away from monetary stability. We're moving towards an unhinged paper currency."
He noted that compared to other currencies, the U.S. dollar is still "the cleanest dirty shirt in the hopsack." However, when compared to goods and services, "it's about as bad as I've ever seen it."
“The price of gold is a clear sign that the dollar is less trustworthy than it used to be. The fact that people are buying Bitcoin is a clear sign of their distrust of the U.S. dollar,” Laffer said. “There's nothing to Bitcoin except as an alternative means of payment on a global scene.”
Laffer also noted that weaponization of the U.S. dollar can lead to its ultimate demise, warning that this trend is accelerating. On where the de-dollarization is going and how big of a threat it is to the dominance of the U.S. dollar as the global reserve currency, watch the video above.
Bitcoin & gold as alternatives
One of the solutions to the U.S. spiralling towards an “unhinged currency” is a return to sound money. However, the question becomes how to return global trust to the U.S. dollar, Laffer stated, pointing to Bitcoin and gold as potential top alternatives.
“What we've done is had a synthetic currency for a long time. Starting with the 1913 Federal Reserve Board Act, the government has been monopolizing money. And what they've done is they've lost the ability to create a usable, trustworthy means of payment,” he said. “Bitcoin is one very real possibility in this scenario. And gold is another one that can be done as well.”
For Laffer's insights on what needs to be done to re-estabilish trust in the U.S. dollar, watch the video above.
“You've got to make the dollar good, and then people will use it, and that's the way to get the dollarization back in the world community,” he said.
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