'The system has now reached its breaking point’: Sridhar Vembu warns of global collapse, proposes gold, silver for global trade

Zoho Corporation's chief scientist Sridhar Vembu on Sunday issued a sharp warning on the state of the global financial order, calling it a “house of cards” rooted in unsustainable US debt. In a detailed post, Vembu argued that the system that has governed global trade for the last 50 years is nearing a breaking point.

"To understand the present crisis, it is useful to understand how the global system has ‘worked’ for the last 50 years,” Vembu wrote on X. “The US imported far more than it exported, issued dollars, those dollars got multiplied (in the global banking system through monetary alchemy!) and such global dollars (US issued + multiplied) ‘fund’ almost all global trade and almost all global investment among nations.”

He explained that the system required the US to go into perpetual debt to fund global trade and investment, at the cost of its own industrial base. “That is what happens when you have to keep importing more than you export for a long time,” he noted.

Referring to the 1985 Plaza Accord, Vembu recalled how the US had once sought to rebalance its trade relationships. “Even as of 1985 (Japan/Germany then playing the role of China now) the system suffered from huge friction due to US manufacturers being outcompeted by lower priced imports...Japan also agreed to ‘voluntarily’ curb its exports to the US.”

He stressed that the system “was never sound” and warned that “the system has now reached its breaking point.”

As tensions between the US and China deepen—fueled by retaliatory tariffs, rare earth export curbs, and restrictions on defence-linked companies — Vembu pointed to the need for a radical rethink of global trade foundations. “What we need is a better foundation for the global trading system. I believe Gold/Silver have to make a comeback as the settlement currency among nations (pay for imports with gold).”

“This will massively reduce imbalances, because the prospect of running out of gold is a real limit on imports,” he added.

However, Vembu cautioned that a shift away from the current model would be painful. “The system has massive paper (digital) claims piled up on top of claims, finally rooted in claims on US debt. That house of cards is the global financial system. We may be facing a structural collapse.”

In response to a comment by Zeitcore founder Kelly Smith — who said he didn’t see a return to gold and silver — Vembu replied, “What would be the ‘something else’? Bitcoin as the global settlement currency? Commodity backed crypto? We clearly need a system that does not depend on the US running bigger and bigger deficits. Gold has one virtue that even non-cooperating nations can trade at arms length!”

Vembu's warning comes as US President Donald Trump's recent imposition of sweeping tariffs on imports from numerous countries has ignited fears of a potential global recession. The US stock market experienced its worst week since the COVID-19 crash, with the Dow Jones falling 7.5%, the S&P 500 dropping 9.1%, and the Nasdaq sinking 10%. Economists, including those from JPMorgan, have raised the likelihood of a U.S. recession to 60%, citing the economic impact of the tariffs. China has retaliated with additional tariffs of 34% on all U.S. goods, escalating trade tensions and contributing to market instability. 

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