Zoho Corporation’s chief scientist Sridhar Vembu has raised alarm bells over the current state of the global financial system, likening it to a fragile “house of cards” sustained by America’s growing debt. In a lengthy post on Sunday, Vembu explained that the financial system underpinning international trade for the past five decades is fundamentally flawed and now approaching a potential collapse.
“To understand the present crisis, it is useful to understand how the global system has ‘worked’ for the last 50 years,” Vembu wrote on social media platform X. According to him, the core mechanism involved the United States consistently importing more than it exported, issuing dollars to finance those imports. These dollars, in turn, were amplified in the international banking framework, which allowed them to serve as the backbone for nearly all global trade and investment between countries.
Vembu highlighted the inherent flaw in such a system: it required the US to perpetually go into debt in order to fund global trade. This dynamic, he warned, came at a significant cost to the American industrial sector. “That is what happens when you have to keep importing more than you export for a long time,” he wrote, implying that the erosion of domestic manufacturing strength was a long-term consequence of this trade model.
Looking back to the 1980s, Vembu referenced the 1985 Plaza Accord as a critical moment when the US attempted to correct its trade imbalances. At the time, Japan and Germany played roles similar to what China plays today—nations with large trade surpluses against the US. “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,” Vembu recalled. That episode, he suggested, revealed cracks in the system even decades ago.
Vembu was unequivocal in his assessment of the system’s foundations. He stated bluntly, “The system was never sound,” and added that, in his view, “the system has now reached its breaking point.” His comments come at a time of heightened economic strain and escalating geopolitical tensions, particularly between the United States and China.
As these tensions rise—fueled by tit-for-tat tariffs, curbs on rare earth exports, and sanctions on companies tied to defense sectors—Vembu emphasized the urgent need to rethink the basis of global trade. “What we need is a better foundation for the global trading system,” he argued. In his view, returning to precious metals as a global standard could offer more stability. “I believe Gold/Silver have to make a comeback as the settlement currency among nations (pay for imports with gold),” he suggested.
Vembu contended that such a shift would naturally limit the potential for long-term trade imbalances. “This will massively reduce imbalances, because the prospect of running out of gold is a real limit on imports,” he explained. Unlike the current system, where digital claims can be endlessly layered upon debt, a gold-based trade framework would introduce a tangible restraint, according to him.
Nonetheless, Vembu acknowledged that transitioning away from the status quo would not be easy. “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,” he warned. His stark assessment suggests that the world’s financial infrastructure may be far more vulnerable than most realize.
His statements came in response to a comment by Zeitcore founder Kelly Smith, who expressed skepticism about a return to gold or silver-based trade. Vembu posed a rhetorical question in reply: “What would be the ‘something else’? Bitcoin as the global settlement currency? Commodity backed crypto?” While acknowledging the possibility of alternative systems, he expressed doubt about their practicality and emphasized the unique value of gold. “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!” he asserted.
Vembu’s warnings come at a volatile moment in global markets. The recent imposition of sweeping tariffs by US President Donald Trump has stoked fears of an impending recession. These new tariffs, aimed at imports from a range of countries, have already had a dramatic impact on investor sentiment. The US stock market has responded with its worst week since the COVID-19 crisis. The Dow Jones Industrial Average dropped by 7.5%, the S&P 500 fell 9.1%, and the Nasdaq tumbled by a steep 10%.
The market turmoil reflects growing concerns over the direction of global trade and the durability of existing economic structures. Economists, including those from JPMorgan, have increased the probability of a US recession to 60%, directly attributing the shift to the economic consequences of the tariffs. Meanwhile, China has responded in kind, announcing an additional 34% tariff on all US goods. The retaliatory move has only intensified fears of a full-scale trade war and contributed further to financial instability.
Vembu’s concerns go beyond just tariffs and trade battles. At the heart of his critique is a deeper structural issue: the reliance on debt-financed consumption by the world’s largest economy to support global trade. He suggests that this model is now dangerously overstretched and that the time has come for a fundamental rethinking of how countries conduct economic exchange.
While some may consider his proposals idealistic or outdated, his broader message is a call for realism in global finance. The decades-long reliance on the US dollar as the de facto international currency, he argues, has allowed for unchecked deficits and unsustainable debt accumulation. His belief that gold or another tangible asset should serve as a universal medium of exchange is rooted in the idea that it would force nations to live within their means, thereby fostering a more balanced and less volatile global system.
Whether or not his prediction of a structural collapse materializes, Vembu’s message taps into a growing unease about the fragility of the existing financial architecture. As trade tensions mount and economic indicators flash warning signs, his call for a reset in how the world handles trade and finance is likely to resonate with those seeking alternatives to the current order.