Dollar

Bubble Trouble

PATRICK LAWRENCE: 

Weaponizing the Dollar

The impulse to dedollarize international trade and financial transactions has been evident for some time. Russia has actively encouraged its trading partners to avoid the dollar in favor of local currencies since Washington imposed sanctions against Russia following the U.S.–cultivated coup in Ukraine five years ago. Russia is now recruiting other nations to participate in its alternative to the U.S.–controlled SWIFT bank-messaging system. China has set up a parallel mechanism, the Cross­–Border Interbank Payments System.   The G–20 gathering marked an important step for these de-dollarization efforts. France, Germany, and Britain announced on the opening day that a trading system developed over the past year to circumvent U.S. sanctions against Iran — and any entity transacting with it — is now operational. The Instrument in Support of Trade Exchanges, or Instex, replaces the Special Purpose Vehicle Europeans devised a year ago. All three sponsors, along with Russia, China, and the U.S., are signatories of the 2015 accord governing Iran’s nuclear programs, which the U.S. repudiated last year. 

It is important, however, not to read too much into Instex and other recent developments. The dollar is not balanced on any precipice of imminent decline. It still accounts for roughly two-thirds of global foreign exchange reserves, according to the International Monetary Fund. A far higher proportion of international transactions are still conducted in the U.S. currency. It remains likely that a serious challenge to dollar hegemony is still a matter of a decade or more in the future.

DYI:  Patrick Lawrence is quite correct America’s decline will be measured in decades.  England is an excellent example during our Civil War [or War of Northern Aggression] the Brits were helping the South and behind the scenes attempting to have what we know today as the continental U.S. divided into four new countries.  They knew then that the hand writing was on the wall for England as their days as a superpower and the pound sterling would be displaced by the U.S. with our huge size and natural resources.  However it was not until the 1930’s as most historians will point out that the baton was passed from the pound sterling to the American dollar.

What we are seeing is the beginning of the beginning of the decline of the U.S. dollar as being supreme.  The U.S. will remain a powerful country, however our days of bending any nation to our will is now waning as readily seen in the international press.

DYI