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This compilation of financial-related insights includes videos from Tech Revolution, Steven Van Metre, and Peter Schiff.
Tech Revolution shares news of Russian sanctions affecting the US in a twist no one saw coming. Steven Van Metre talks about the Israel conflict unleashing fear of the economic nightmare scenario. Peter Schiff on episode 923 of his show discusses why the US can’t afford peace and let alone war.
Tech Revolution
Oct 9, 2023
For nearly 80 years since World War II ended, the US dollar has been the kingpin in global finance. But a new conflict has prompted many nations to think about trading without using the dollar, sparking concerns about its lasting influence.
When Russia attacked Ukraine in February 2022, the US, leading other countries, slapped strong financial punishments on Moscow. Two major moves stood out: freezing a big chunk of around $300 billion of Russia’s foreign money and cutting major Russian banks from SWIFT, a crucial service for global payments.
These steps, seen by some as turning the dollar into a financial weapon, have led powerhouses like Russia and China, who often lock horns with the US, to boost their financial systems. But it’s not just these two. From India to Brazil, South Africa to Southeast Asia, countries are trying to reduce their reliance on the dollar. Why? Many fear the US might use its currency’s power against them, just like it did with Russia.
The dollar has been the lead actor on the global trade stage since its debut shortly after World War II. Picture this: in 1944, the lush setting of Bretton Woods, New Hampshire, saw 44 nations gathering.
To stitch the world’s economy back together after the ravages of war. The US, the world’s economic titan, proposed a golden deal. The dollar would be tied to gold, and other countries would tether their currencies to this golden dollar.
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This made the dollar a coveted backstage pass in the global financial concert. But by the 1970s, the stage set changed. The US didn’t have enough gold to support its grand dollar promise. Yet, the dollar’s influence didn’t fade. Thanks to the US’s dynamic financial scene, clear corporate rules, and the dollar’s steadiness, it remained the currency idol even without the golden leash.
However, this isn’t the first time murmurs of a change in lead roles have been heard. There was chatter when the Bretton Woods curtains closed when Europe introduced the euro in 1999 and amidst the drama of the 2008-2009 financial meltdown.
The dollar weathered those plot twists. Today, it claims the lion’s share, with around 60% of the world’s money safes having dollars. But, it’s worth noting the script is changing slightly. The dollar’s star billing has shrunk from 70% in 2000.
And while the euro’s role has grown just a smidge, China’s renminbi is making rapid cameo appearances, although it still represents less than 3% of the global money stash. “We’re seeing a shift towards a play with multiple leads, evidenced by the dollar’s slipping role,” Alicia García Herrero from the Bruegel think tank shared with Al Jazeera.
The recent acts in global events seem to be encouraging countries to consider other leading currencies even more. You see, what happened is “It’s like the finance world’s ‘nuclear button’ was pressed with the SWIFT ban on Russia,” says Zongyuan Zoe Liu from the New York-based Council on Foreign Relations.
To understand SWIFT’s importance, think of how Gmail dominates the email world. “Disconnecting Russia from SWIFT is like severing their financial lifeline,” Liu commented. This move rattled countries, especially ones like China, which often find themselves on the US’s watchlist. Fears of similar sanctions affecting their economies are pushing them to pivot away from the US dollar.
Ahmadi Ali, an expert in sanctions, emphasized how getting booted from SWIFT can isolate a country, disrupting its global trade and economic health. China’s recent actions illustrate this trend. They’ve reduced their US debt holdings to $870 billion, a dip to levels not seen since 2010. Additionally, they’re forging trade deals using their currency, the yuan. Case in point: Iraq and Bangladesh, both major trade players, have started using the yuan for trade.
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China has also strengthened ties with members of the Shanghai Cooperation Organisation, promoting local currency trade. And not to miss, China’s landmark transaction with Saudi Arabia was in yuan. Russia’s joining the party, planning to stow its 2023 oil and gas profits in yuan, solidifying its shift to Chinese currency reserves.
But, there’s more to the story. Nations aren’t just worried about sanctions.
Steven Van Metre
Oct 9, 2023
Israel Conflict Unleashes Fear of the Nightmare Scenario
Peter Schiff
Streamed live Oct 9, 2023
The US Can’t Afford Peace, Let Alone War – Ep 923
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