Posted on 03/10/2022 9:47:12 PM PST by SeekAndFind
The government of the United States has intervened militarily in other countries for decades, against the council of founders like George Washington who advised America should “observe good faith and justice towards all nations; cultivate peace and harmony with all.”
But the U.S. doesn’t only project power across the globe through its massive military. It also weaponizes the U.S. dollar, using its economic dominance and its privilege as the issuer of the reserve currency as a carrot-stick tool of foreign policy. The U.S. government showers billions of dollars in foreign aid to “friends.” On the other hand, “enemies” can find themselves locked out of SWIFT, the global financial system that the U.S. effectively controls using the dollar.
SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. The system enables financial institutions to send and receive information about financial transactions in a secure, standardized environment. Since the dollar serves as the world reserve currency, SWIFT facilitates the international dollar system. SWIFT and dollar dominance give the U.S. a great deal of leverage over other countries.
The U.S. has used the system as a stick before. In 2014 and 2015, the Obama administration blocked several Russian banks from SWIFT as relations between the two countries deteriorated. Under Trump, the U.S. threatened to lock China out of the dollar system if it failed to follow U.N. sanctions on North Korea. Treasury Secretary Steven Mnuchin threatened this economic nuclear option during a conference broadcast on CNBC.
“If China doesn’t follow these sanctions, we will put additional sanctions on them and prevent them from accessing the U.S. and international dollar system, and that’s quite meaningful.”
Locking a country completely out of SWIFT would effectively cut it off economically from the world. But there would also be consequences that ripple through other economies. For instance, a member of the Russian parliament warned locking his country completely out of SWIFT would halt the flow of goods into Europe.
If Russia is disconnected from SWIFT, then we will not receive [foreign] currency, but buyers, European countries in the first place, will not receive our goods — oil, gas, metals and other important components.”
Given America’s history of using sanctions as a foreign policy tool, Russia wasn’t unprepared for the move. In fact, A number of countries that know they could easily find themselves in the crosshairs have taken steps to limit their dependence on the dollar and have even been working to establish alternative payment systems. This includes Russia, China and Iran.
Russia developed its own payment system for internal use several years ago. According to the Central Bank of Russia, 416 Russian companies and government organizations had joined the System for Transfer of Financial Messages (SPFS) as of September 2018. A growing number of central banks have also been buying gold as a way to diversify their holdings away from the greenback.
The European Union is imposing additional sanctions that would target 160 Russian leaders and prominent figures — including oligarchs.
The new sanctions extending to Belarus, which include reduced access to the SWIFT banking system. @NBCNews — Kyle Griffin (@kylegriffin1) March 10, 2022
Before ending its purchase program at the onset of the COVID pandemic, Russia was the biggest central bank buyer of gold. The Central Bank of Russia bought $4.3 billion worth of the yellow metal between June 2019 and June 2020. And the Russians were buying gold long before that. The Central Bank of Russia bought gold every month from March 2015. According to Bloomberg, “Russia spent more than $40 billion building a war chest of gold over the past five years, making it the world’s biggest buyer.”
Meanwhile, the Russian central bank was aggressively divesting itself of US Treasuries. Russia sold off nearly half of its US debt in April 2018 alone, dumping $47.4 billion of its $96.1 billion in U.S. Treasuries. It’s not just America’s “enemies” who are worried about the U.S. abusing its economic power. Her friends are also wary, as they should be.
After Donald Trump pulled the U.S. out of the Iran nuclear deal, the EU announced the creation of a special payment channel to circumvent U.S. economic sanctions and facilitate trade with Iran. EU foreign policy chief Federica Mogherini made the announcement after a meeting with foreign ministers from Britain, France, Germany, Russia, China and Iran. She said the new payment channel would allow companies to preserve oil and other business deals with Iran.
This underscores a risk to the U.S. sanction policies could also have long-run consequences, eventually undermining the dollar as the world reserve currency. Economic analyst Peter Schiff warned that other countries are watching how the U.S handles its power as the issuer of the global reserve currency during the Russian-Ukraine war.
China is looking on thinking, well, Russia is doing something America doesn’t want. They’re getting sanctioned. What if we do something that America doesn’t want? We get sanctioned. They pull the dollar out from under us. Let’s get out from under the dollar on our own. Let’s not leave this weapon in the hands of the U.S. that can be turned against us at any time.”
If enough countries abandon the dollar, the value of the U.S. currency would collapse and create economic chaos here at home. The de-dollarization of the world economy would likely perpetuate a currency crisis in the United States. Practically speaking, it would likely lead to hyperinflation.
Meanwhile, the U.S. government should be wary of throwing its economic weight around too glibly. It isn’t the only country with an economic nuclear option. China ranks as the largest foreign holder of U.S. debt. If the Chinese were to dump a significant amount of U.S. Treasuries, it would collapse the bond market and make it impossible for the U.S. to finance its massive debt.
America’s undeclared wars have cost trillions of dollars. And economic sanctions are an act of war. Most people view economic sanctions as an acceptable alternative to military force. But economic warfare also comes at a cost. It’s typically not the sanctioned government that suffers. It’s the innocent people living in that country that must cope with shortages and increasing prices.
As James Madison said, “Of all the enemies to public liberty war is, perhaps, the most to be dreaded, because it comprises and develops the germ of every other.”
War always comes at a steep cost—whether military or economic.
I have been seeing stupid from financial illiterates like this guy for decades. So much stupid, too little time to debunk so I’ll just do this one.
“China ranks as the largest foreign holder of U.S. debt. If the Chinese were to dump a significant amount of U.S. Treasuries, it would collapse the bond market and make it impossible for the U.S. to finance its massive debt.”
So China is going to sell its treasuries and blow its own brains out. Losing a trillion dollars on their 3x+ trillion of US treasuries? Plus this author does have a clue on how the bond markets work. There is a huge amount of interconnected hedging between US notes and bonds and other debt instruments. If US bonds move, that causes other buying or selling. If the Chinese started massively selling US bonds, yeilds would go up. Huge pension funds and sovereign wealth funds would greedily step in and buy. Hedgers and arbs against morgage debt intruments would buy. The FED itself could buy all of China’s bonds in one swoop. They bought triilions of dollars of bonds after 2008 and just recently during covid. Plus this genius doesn’t realize that China does not want a weak US dollar. It would crush their mercantilist export economy. It would make it cheaper to make things in the US. That’s why they peg the yuan cheaper to the dollar. China is already nervous as hell at companies moving supply chains out.
“Bitcoin is inevitable.”
Bitcoin is a hobbyist designed coin that has fatal flaws preventing it from scaling out as would be required. Plus the central banks of the world ARE NOT going to allow widespread competition. China and India have already said no thanks.
Possible but unlikely.
Till the 17th Amendment is repealed, the current form of Fedzilla will continue.
If the conversion to CBDC is Federally mandated under emergency powers (how else could they do it?), it seems unlikely they would exempt local banks and credit unions from the Fed takeover.
You’re still right that local is better, but it may not be better enough to make a difference in the end game.
The entire concept of Bitcoin is that it’s backed by math, which is even more immutable than gold.
There is no law against holding both, like I do. My BTC at the moment is about 70x my investment. My gold is lovely to gaze upon but not even keeping pace with inflation.
Like it, fear it, disdain it, Bitcoin doesn’t care. It will just keep munching away at fiat.
Ask yourself what USD exchange rate for Bitcoin will completely shatter confidence in the old system? $100K? How about another zero, will that do it?
Whatever it is, it’s on the road ahead.
And so are its citizens.
Locking people out of accounts, like in canada, or banks/credit cards cancelling folks accounts for political differences is a problem.
May have to go back to a barter society.
Digital currencies are fine until they are hacked.
Your beloved bitcoin is going to zero in the years ahead. A cool concept inital coin but fatally flawed. Look at a 6 month chart, down and down.
“The entire concept of Bitcoin is that it’s backed by math, which is even more immutable than gold.”
Quatum computing will make it worthless.
And the transmutation of base metals (lead, etc.) into gold will make gold useless.*
Regards,
*Just funnin' yuh, there!
I think the entire banking system, by letting itself be used politically, is committing suicide. Witness Canada, where there was a virtual run on the banks after Trudeau ordered the seizing of the funds of the truckers and anybody associated with them, as well as essentially freezing all transactions involving them.
Nobody trusts the banks anymore, and nobody trusts electronic transfers or digital currencies because the governments have suddenly gotten the power to use these to punish their political enemies and to do so without judicial interventions or judgments … not criminals or terrorists, but simply people who disagree. It’s very dangerous to destroy the population’s confidence in their country’s financial system.
A few thing that the bitcoin fanboys never understand...
How much crypto money has been created out thin air. Instead of the FED printing, some nobody creates a new coin and wham, new money added to the total aggregate money supply. For heavens sakes, Fraudbook/Zuckerscum can now print money.
Bitcoin was a hobbyist concept coin. And just like a concept car created for some big auto show, that doesn’t mean that car can go into production.
The problem I have with BTC is that, under the surface of good and serious people wanting to maintain their wealth, are evil people who created it for nefarious purposes.
I see the issue between Great Reset (on the side of fiat and BTC creation) versus Great Awakening - folks wanting to tear down fractional-reserve bankstering that put the US (and similarly, all nations) in perpetual debt.
The long run of fiat is nearing its end-of-life.
When it comes down, cryptos backed by PMs will rule. PM-backed currencies will rule. Ponzi unbacked cryptos, like BTC, but especially BTC, will not be restored.
This is covered under NESARA/GESARA - recovery Acts, put in place for what will rise out of the fiat ashes. Bank accounts, 401k’s and cash will convert to a ‘rainbow’ currency (there are pictures of what the paper version may look like on the web and posted previously on FR). I don’t believe BTC survives that.
Cancel Karens are notoriously poor at dynamic analysis. They never consider the consequences of turning up the heat, even as they themselves are soaking in the same kettle.
RE: Those countries aren’t worried about being sanctioned by the US.
It’s the rest of the world that is getting worried about an increasing unhinged and irrational USA.
Then shouldn’t the rest of the world be seeking safe haven AWAY from the USD into other currencies? But that’s not what’s happening.
Putin has been working to decouple from the Rothschild central bank in London since 2017. Russia is now going on a gold backed system. IMO the first step into QFS. The Swift system is on borrowed time.
You said that in March. Of 2021.
Don’t forget your booster appointment. No shot no check. 😉
If the Chinese were to dump a significant amount of U.S. Treasuries, it would collapse the bond market and make it impossible for the U.S. to finance its massive debt.The old saw is that if you owe the bank $10,000, the bank owns you; but if you owe the bank $10,000,000, you own the bank.
The international banking system has no national loyalty, it is motivated only by its own pecuniary benefit. China already controls the US.
I get a check regardless of vaccination status. Life for the moment is good!
In the relatively near future we will have robotic mining of asteroids. The dilemma the mining consortiums may face is too much PMs being mined for the market to “bear” (misspelling intentional).
No enormous new supply of Bitcoin will be discovered in space, I promise you.
Someone mentioned quantum computing. The encryption of Bitcoin is via the hashing function SHA-256. The encryption of the Internet itself is based on hashing functions. If quantum computing “cracks” the hashing function without first establishing a new quantum-based encryption standard, the Internet itself is what will be cracked and broken, not just Bitcoin. Global economic ruin follows.
Worrying about quantum computing cracking Bitcoin is like worrying about a 100-mile wide asteroid hitting your bank. Yeah, the bank will be gone, for sure, but it won’t matter to a melted planet.
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