Some comments on the article by Michael Day – from msn.com. – 31 March 22
There is only one true superpower really. Since the end of the Second World War, we’ve seen the United States bestride the world like a colossus.
This is conferred by the mighty US dollar.
Its status as the undisputed reserve currency (it accounts for around 60 per cent of world reserves, compared with just 20 per cent for its nearest rival, the euro) means that Washington’s tendrils extend into almost all banks and financial institutions.
the US can slap crushing financial sanctions on foreign firms or governments anywhere in the world.
Russia and China are gunning for it. If they can end the dollar’s primacy with a mix of digital and cryptocurrencies and alternative payment systems, US supremacy will end, too – and the world will change for ever.
The dollar has been the world’s reserve currency since 1944, when the US and its allies, planning for post-Second World War construction, agreed at the Bretton Woods Conference to peg the American currency to the rate of $35 per ounce of gold.
According to Michael Day – in 1971 when Richard Nixon allowed the dollar’s value to fluctuate. The reality was that the US budget was not balancing, and many countries were uncertain of the US$ and wanted to be paid in gold, and there was not enough. So Nixon closed the “gold window”. The result has been a HUGE erosion of US$ value against gold. From $35 and oz to $1941 today = decrease to 1.8% of it’s 1971 value!!
Japan’s and West Germany’s exports had soared on the weakness of their own currencies, and they sold to the US, which, by 1971, could no longer pay for the cheap imports.
The dollar’s primacy among currencies has remained unchallenged, according to Michael Day. This is not factually correct, because in the 1970’s American bribed the Saudi’s to conduct their oil trade in Petro dollars (= US$), by offering protection and other baubles!!
Then the US moved it’s gaze to South America, incredibly well captured in Confessions of an Economic Hitman and sequels (John Perkins), which describes the despicable acts of the CIA, in forcing the leaders to become American puppets, and assassinating them if they refused. The destruction of Venezuela was so bad that the country has never recovered from the carnage!! To this day the Venezuelans hate the Americans, with good reasons.
When Saddam Hussein decided to sell his oil for € that was the end of his life and Iraq. The US even stole Iraq’s oil fields. The “weapons of mass destruction” dreamed up by Dick Cheney, is now well documents and understood to be a fraud on the world!
More recently Gaddafi tried the same, and Libya was just about bombed into extinction!
Nothing nice about the biggest bully boy in the world.
Of more concern to the rest of the world is how the dollar’s outsize role in international trade can hurt the global economy. As a country’s currency weakens, its exports should become cheaper and therefore more competitive. But because so much trade in other countries is conducted in US dollars, smaller countries do not always see this benefit when their own currency depreciates.
As South Africans our currency bore the brunt of the money erosion. In some inextricable way our currency depreciated horribly after the 1994 democracy, while the power of the US$ remained intact.
Russian resentment of the dollar has been growing since 2014, when its invasion of Donbas and Crimea provoked sanctions from the Obama administration. Beijing’s determination to resist the US dollar went up a gear following the trade war and sanctions it endured during its spat in 2018 with the Trump administration. The war in Ukraine looks set to boost their resolve.
Many pundits say that there’s a danger that the tough US-led sanctions in response to the Ukraine crisis – while wounding Russia now – will ultimately strengthen the de-dollarisation movement and end US global leadership.
Analysts are now talking about a “turning point” for the dollar. The real shock among the sanctions dumped on Russia following its attack on Ukraine has been America’s move to stop Russia’s central bank from accessing its foreign currency reserves; with the UK, Europe and Japan on board, more than half of Moscow’s $630bn war chest accrued in foreign banks, used to prop up the rouble in times of crisis, has been frozen.
Attempts by Russia and China to build a new financial order are well under way. Russia is trying to build sanction-proof alternatives to the ubiquitous Swift international payment system, which allows banks to communicate with one another.
What is quite clear is that Ripple’s Cryptocurrency XRP is the front runner in crypto space to take the role of both Swift and a global financial currency, but most of the world is not ready for this shift.
One is a homespun alternative to Visa and Mastercard. The other is Moscow’s own messaging system – the System for Transfer of Financial Messages, or SPFS – as a rival to Swift. So far, this system has allowed Russia only very limited access to global markets.
Since October 2018, major Russian energy companies have stopped using the US dollar. By the end of 2020, more than 83 per cent of Russian exports to China were settled in euros.
Moscow and Beijing want other countries, some ambivalent about US ties (such as Turkey) or those with an axe to grind (such as Iran) to join their campaign against the dollar.
Russia has tried to muster further support by promoting the Brics grouping, – Brazil, China, India, Russia, and South Africa – and the Shanghai Cooperation Organisation. Brics’s New Development Bank deals in local currencies to “break away from the tyranny of hard currencies”. India, Brazil and South Africa all conspicuously failed to condemn Putin’s invasion of Ukraine.
Russia is co-operating tirelessly with China, America’s other nemesis, to reduce dependence on the dollar. In 2016, prime minister Dmitry Medvedev called for the two countries’ national payment systems to be harmonised and for direct settlements in yuan and rubles.
In February this year, Xi Jinping announced that the friendship between the two nuclear-armed autocracies was “without limits”, as China gave the tacit nod of approval for Moscow’s invasion of Ukraine, while Russia did the same for a future attack on Taiwan.
China hopes that partnership with Russia will help it build a yuan-based financial system – including Beijing’s own rival to Swift, and an alternative bank card payment system – thereby boosting the yuan’s status as a reserve currency.
The yuan (the currency’s official title is the renminbi or RMB; its units are yuan) has a very long way to go. Currently it accounts for less than 3 per cent of global reserves.
There is a long story of American bullying, and the Michael Day article goes on through many details, and it’s conclusion is that the US$ will be the world currency for some years.
Martin Armstrong on the other hand says the indications of his super computer programme Socrates says that democracy will die by 2032 and the world order is shifting, and will never be the same.