The death of the dollar?

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Is there a worldwide run on the Bank of the United States of America?

In talking this week with a friend about the United States seemingly imploding from within across multiple sectors, my friend stressed: “It’s not just from within. There is a run on the United States from certain nations and business interests around the world. Just like there was a run on banks after the collapse of Silicon Valley Bank, many nations are either thinking about — or actually proceeding with — transferring at least a portion of their allegiance, assets and commitments from the ‘Bank of the U.S.’ to the ‘Bank of China’ or elsewhere.”

This was not just some person sitting on a porch casually talking about current events while whittling a stick waiting for his Social Security or pension check to hit the mailbox. This was a former high-level U.S. government official, now a CEO, someone who sits on the boards of directors for multiple companies. He has massive real-world and business experience and believes the United State may be on the verge of collapse.

He is far from the only one to think that.

Some fear the Biden administration is losing control of our southern border; losing control of our decaying, crime-infested big cities; creating a recession; vilifying and needlessly destroying the fossil fuel industry while pushing suspect and subsidized “green” energy alternatives; leaving tens of billions of dollars in military equipment in Afghanistan while withdrawing our troops and abandoning an ally; stepping closer to a trip-wire in the Ukraine war, which could trigger a nuclear strike; turning on Israel over ideological issues as Turkey and others call on Arab and Muslim nations to unite and crush the Jewish State; weakening our military with one “woke” edict after another; focusing on “trans” issues at the expense of failing transportation infrastructure; cheerleading the social justice warrior takeover of our colleges and universities; and weakening the dollar (the currency much of the world depends upon).

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All of these failings are true. BUT they're not the ones the "rest of the world" is concerned about. The biggest ones are

a) The USA and its NATO "allies" are getting their ass handed to them in Ukraine, and since the USA came to dominate the world by giving the impression of military invincibility, once the spell is broken resentment and blowback emerge.

b) The second is that the USA overplayed its "world reserve currency status" card by villifying, sanctioning, and seizing the assets of any nation it didn't like. Worse, by imposing secondary sanctions on other nations who didn't want to comply with USA diktat.

c) And, finally, yes... by constantly overspending and getting into massive, unpayable debt in every direction, the U$D is worth less.

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Is it any wonder, then, that nations such as France, India, Saudi Arabia, Japan, Mexico, Brazil and others are suddenly hedging their bets by looking beyond the United States of America for partnerships and stability?

France.... Mexico... Saudi Arabia... Brazil...

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https://thehill.com/opinion/white-house/3950467-is-there-a-worldwide-r
un-on-the-bank-of-the-united-states-of-america/

And Africa in general.

But while this is probably catastrophic for the USA, it won't be a SUDDEN catastrophe bc it will take months and YEARS for other nations to disentangle themselves financially and economically from the USA. Bc it will take other nations months and YEARS to remove themselves from the SWIFT and IMF and find other reliable, stable platforms, trade partners, lenders, and currency pairs.

China is ready to step in but it does not have a universally adopted interbank platform or currency. So there will be many instances of detailed negotiations and specific trade deals before the U$D becomes just a currency among currencies.

ATM we're seeing a rush out of the door, but once this spare of early adopters leaves, the rush will slow down.

I hope we use

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White House digs in on debt strategy after House Republicans' passage of their plan

https://news.yahoo.com/white-house-digs-debt-strategy-144507831.html

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The US Dollar share of total global reserves in real terms has collapsed from about 66% in 2003, to 55% in 2021, to 47% in 2022. In particular, the 8% US dollar reserves decline over the last year is very concerning as it is roughly 10x the average annual decline over the past two decades.

the US implemented currency-based sanctions in response to the Russia-Ukraine war. In response some foreign central banks have been emptying their coffers of US Dollar based assets.
As you can see below, however, the main reserve replacement hasn't been another major currency (Euro, Yen and Yuan reserves are up <4%).

Rather, the main replacement for the US Dollar's decline in central bank reserves over the last year has been gold. 1,136 tonnes were added in 2022, the largest central bank increase in gold reserves on record. With emerging economies such as Russia and China leading the way.

International Transactions:

The US Dollar is still by far the dominant global reserve currency from a transaction point of view. In fact, between 2009 - 2019 it accounted for a whopping 96% of all international transactions. This in turn creates significant and lasting network effects. Basically, people throughout the world accept the dollar because they know others will and have been doing so for their entire lifetime. For now, people throughout the world continue to believe the US Dollar a useful tool for exchange. However, that percentage of global transactions while still high, has also been falling. The latest data available shows it declined from the 96% average previously stated to 88% by April of last year.

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https://seekingalpha.com/article/4597560-will-us-dollar-lose-its-globa
l-reserve-status

I think that tracking non-dollar trade is going to be difficult, since some of it (and an increasing amount) avoids the SWIFT and the BIS.


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"It may be dangerous to be America's enemy, but to be America's friend is fatal." - Henry Kissinger

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Mexican president backs US dollar as world’s principal currency

https://www.reuters.com/world/americas/mexican-president-backs-us-doll
ar-globes-principal-currency-2023-05-08/

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The UN gets shifted out, maybe it will save the US Dollar?


Growing signs that BRICS may push UN out of New York

https://www.counterpunch.org/2023/04/28/relocating-un-headquarters-out
-of-the-united-states/

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Editorial from Biden's new economic advisor, Jared Bernstein Aug 27, 2014.

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"THERE are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?

But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

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The privilege of having the world’s reserve currency is one America can no longer afford."

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Originally published by NYT.

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"It may be dangerous to be America's enemy, but to be America's friend is fatal." - Henry Kissinger

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