In the full panoply of the Biden administration’s foreign policy errors aned gaffes, perhaps none was so stupid as its failed attempt to weaponize the dollar—the world’s reserve currency—against Russia for its invasion of Ukraine.
It’s telling that during World War II, neither the United States nor the United Kingdom—when the British pound sterling was the world’s reserve currency—ever considered weaponizing their currencies against Germany, Japan, or Italy. But wiser heads were running the allied nations then.
But President Joe Biden and Secretary of State Antony Blinken, along with Treasury Secretary Janet Yellen, did exactly that. And they lost. In the immediate aftermath of the Russian invasion, the ruble fell, as expected. But then for much of last year, the ruble actually gained strength relative to the dollar—stronger than it had been before the invasion!
It has only declined again since the winter, after Russian battlefield setbacks in the Donbas and the mutiny of the Russian mercenary Wagner Group.
Far worse, though, is that Biden’s reckless foreign policy failure has damaged—perhaps irrevocably—the status of the U.S. dollar as the world’s reserve currency.
Hitting the USA Like a Ton of BRICS
In August, the BRICS countries—Brazil, Russia, India, China, and South Africa—will meet in Johannesburg, South Africa, and “de-dollarizing” the global economy is on the summit agenda. While nobody expects the dollar to be displaced anytime soon, the rise of digital currencies—and particularly CBDCs, central bank digital currencies—will make it much easier to bypass U.S. Treasury and SWIFT (Society for Worldwide Interbank Financial Telecommunication sanctions, the incumbent means of transferring funds globally) sanctions. At least one study says this could be achieved, given CBDCs and other blockchain alternatives:
“Our analysis suggests that the use of new financial technologies (e.g., blockchain, digital currencies, and cloud-based financial infrastructure) can propel the formation of a revisionist de-dollarization coalition and strengthen the credibility of collective mobilization. Such a coalition could lead to the creation of new market instruments and infrastructure that exclude the incumbent power [i.e., the United States], serve as global public goods with a broader buy-in, and divert global financial traffic away from the incumbent system.”
‘Two Ways: Gradually, Then Suddenly’
Ernest Hemingway’s quote about how one goes bankrupt—“gradually, then suddenly”—seems apt given the rapidity with which de-dollarization has been occurring since the Biden administration imposed its dollar sanctions on Russia.
While there was talk of de-dollarizing for years, geopolitical and U.S. domestic factors over the last nine months have exacerbated it.
First, obviously, sanctioning Russia last year using the dollar and SWIFT has led countries that are less closely aligned to the United States to consider alternatives to the dollar. Then, in October 2022, Brazil’s left-wing president, Luiz Inácio Lula da Silva, who has sought closer ties to China, won a narrow victory (by less than 2 percentage points) over conservative incumbent president Jair Messias Bolsonaro. Then, in November 2022, U.S. elections delivered a Congress narrowly divided between the two major parties. Finally, in January, the failure of the U.S. House of Representatives to promptly elect a House Speaker showed how divided America is not only between the two major parties but even within the majority House Republican party.
Given the circumstances, a whole wave of transactions were announced in the first half of 2023 that sought to de-dollarize several bilateral and regional trading arrangements that have traditionally been conducted in dollars:
- In January, Saudi Arabia said it would consider accepting Chinese yuan for oil sales, although the Saudis will likely rapidly convert the yuan receipts to gold, euros, or dollars.
- In early February, China and Brazil agreed to a clearing agreement to use Chinese yuan in cross-border transactions. By the end of March, the yuan had surpassed the euro as Brazil’s second-leading currency reserve, after the U.S. dollar.
- At the end of March, China and France completed their first liquefied natural gas (LNG) using yuan.
- Around the same time, Russia increased it holdings of Chinese yuan as a reserve currency.
- Just days earlier, Saudi Aramco inked a deal to build a refinery for 83.7 billion Chinese yuan ($12.2 billion) in Liaoning province, China.
- In April, India and Malaysia agreed to conduct trade in Indian rupees.
- In May, South Korea and Indonesia agreed to undertake trade in their respective currencies, cutting out the dollar.
- Also in May, the Association of Southeast Asian Nations (ASEAN ) agreed to de-dollarize commerce among themselves and use their local currencies.
- In June, Pakistan paid Russia for discounted oil in yuan.
To Lead the World, Lead the World
It’s unlikely China, local and bilateral agreements, or even a new currency will supersede the dollar as the world’s reserve currency anytime soon. Global reserves are denominated overwhelmingly in dollars for the time being. That’s because our markets are far larger and better regulated than virtually anywhere else in the world. The dollar is seen as “safe,” relative to other currencies.
Moreover, our per capita GDP is far greater than most any other major economy, although China’s economy is expected to eclipse the United States in pure dollar terms because of its larger population.
But the United States cannot just rest on its laurels, or other countries will continue to lose confidence in our currency. That would have a tremendously deleterious effect on U.S. trade, prestige, and global leadership. It would also undermine what former French president Valery Giscard d’Estaing once called our “exorbitant privilege”—that is, our means of obtaining an interest-free loan from other countries that hold our dollars as reserves.
Summary
We have been reckless in our money printing and deficit spending and our leaders have also failed to create a single, unified set of budgetary priorities to which both parties can more readily agree. All that makes the dollar, over the long term, a riskier bet for other nations to hold as a reserve. So “de-dollarizing” their transactions can serve their interests.
Cartoonist Walt Kelly, creator of the long-running “Pogo” comic strip, wrote, “We have met the enemy, and he is us.” Kelly was talking about climate risk on the first Earth Day. But his comments are equally applicable to the U.S. fiscal and monetary situation. Our deep political divisions, our chronic inability to live within our means, and our reckless tendencies to write checks and make commitments overseas that we cannot cover and cannot meet are the biggest enemy of the dollar’s fiscal integrity and its utility as the world’s reserve currency.
In January, I wrote here about the kind of tough choices the United States needs to make to ease our deficits and help restore the credibility of the dollar, both for our own nation’s betterment and to ensure the dollar’s continuing credibility among other nations as the world’s reserve currency.
But Americans need to do more than that.
Just as we have sworn off the use of poison gas and biological weapons on the battlefield, we must also forever foreswear “weaponizing” the dollar against our enemies and our adversaries. We can certainly embargo critical materials, as we did with oil with Japan when it invaded Indochina in 1941. We can certainly freeze U.S.-based foreign assets of offending nations, as we did with Iran after it seized the U.S. embassy in Tehran in 1979. However, the “unprecedented and expansive” currency and banking sanctions the Biden administration proudly imposed on Russia over Ukraine created a greater threat to the world’s confidence in the dollar as a reliable reserve currency than an impediment to the Russian war machine.
We should never repeat doing so again, absent total war with an enemy.
Article cross-posted from our premium news partners at The Epoch Times.
Five Things New “Preppers” Forget When Getting Ready for Bad Times Ahead
The preparedness community is growing faster than it has in decades. Even during peak times such as Y2K, the economic downturn of 2008, and Covid, the vast majority of Americans made sure they had plenty of toilet paper but didn’t really stockpile anything else.
Things have changed. There’s a growing anxiety in this presidential election year that has prompted more Americans to get prepared for crazy events in the future. Some of it is being driven by fearmongers, but there are valid concerns with the economy, food supply, pharmaceuticals, the energy grid, and mass rioting that have pushed average Americans into “prepper” mode.
There are degrees of preparedness. One does not have to be a full-blown “doomsday prepper” living off-grid in a secure Montana bunker in order to be ahead of the curve. In many ways, preparedness isn’t about being able to perfectly handle every conceivable situation. It’s about being less dependent on government for as long as possible. Those who have proper “preps” will not be waiting for FEMA to distribute emergency supplies to the desperate masses.
Below are five things people new to preparedness (and sometimes even those with experience) often forget as they get ready. All five are common sense notions that do not rely on doomsday in order to be useful. It may be nice to own a tank during the apocalypse but there’s not much you can do with it until things get really crazy. The recommendations below can have places in the lives of average Americans whether doomsday comes or not.
Note: The information provided by this publication or any related communications is for informational purposes only and should not be considered as financial advice. We do not provide personalized investment, financial, or legal advice.
Secured Wealth
Whether in the bank or held in a retirement account, most Americans feel that their life’s savings is relatively secure. At least they did until the last couple of years when de-banking, geopolitical turmoil, and the threat of Central Bank Digital Currencies reared their ugly heads.
It behooves Americans to diversify their holdings. If there’s a triggering event or series of events that cripple the financial systems or devalue the U.S. Dollar, wealth can evaporate quickly. To hedge against potential turmoil, many Americans are looking in two directions: Crypto and physical precious metals.
There are huge advantages to cryptocurrencies, but there are also inherent risks because “virtual” money can become challenging to spend. Add in the push by central banks and governments to regulate or even replace cryptocurrencies with their own versions they control and the risks amplify. There’s nothing wrong with cryptocurrencies today but things can change rapidly.
As for physical precious metals, many Americans pay cash to keep plenty on hand in their safe. Rolling over or transferring retirement accounts into self-directed IRAs is also a popular option, but there are caveats. It can often take weeks or even months to get the gold and silver shipped if the owner chooses to close their account. This is why Genesis Gold Group stands out. Their relationship with the depositories allows for rapid closure and shipping, often in less than 10 days from the time the account holder makes their move. This can come in handy if things appear to be heading south.
Lots of Potable Water
One of the biggest shocks that hit new preppers is understanding how much potable water they need in order to survive. Experts claim one gallon of water per person per day is necessary. Even the most conservative estimates put it at over half-a-gallon. That means that for a family of four, they’ll need around 120 gallons of water to survive for a month if the taps turn off and the stores empty out.
Being near a fresh water source, whether it’s a river, lake, or well, is a best practice among experienced preppers. It’s necessary to have a water filter as well, even if the taps are still working. Many refuse to drink tap water even when there is no emergency. Berkey was our previous favorite but they’re under attack from regulators so the Alexapure systems are solid replacements.
For those in the city or away from fresh water sources, storage is the best option. This can be challenging because proper water storage containers take up a lot of room and are difficult to move if the need arises. For “bug in” situations, having a larger container that stores hundreds or even thousands of gallons is better than stacking 1-5 gallon containers. Unfortunately, they won’t be easily transportable and they can cost a lot to install.
Water is critical. If chaos erupts and water infrastructure is compromised, having a large backup supply can be lifesaving.
Pharmaceuticals and Medical Supplies
There are multiple threats specific to the medical supply chain. With Chinese and Indian imports accounting for over 90% of pharmaceutical ingredients in the United States, deteriorating relations could make it impossible to get the medicines and antibiotics many of us need.
Stocking up many prescription medications can be hard. Doctors generally do not like to prescribe large batches of drugs even if they are shelf-stable for extended periods of time. It is a best practice to ask your doctor if they can prescribe a larger amount. Today, some are sympathetic to concerns about pharmacies running out or becoming inaccessible. Tell them your concerns. It’s worth a shot. The worst they can do is say no.
If your doctor is unwilling to help you stock up on medicines, then Jase Medical is a good alternative. Through telehealth, they can prescribe daily meds or antibiotics that are shipped to your door. As proponents of medical freedom, they empathize with those who want to have enough medical supplies on hand in case things go wrong.
Energy Sources
The vast majority of Americans are locked into the grid. This has proven to be a massive liability when the grid goes down. Unfortunately, there are no inexpensive remedies.
Those living off-grid had to either spend a lot of money or effort (or both) to get their alternative energy sources like solar set up. For those who do not want to go so far, it’s still a best practice to have backup power sources. Diesel generators and portable solar panels are the two most popular, and while they’re not inexpensive they are not out of reach of most Americans who are concerned about being without power for extended periods of time.
Natural gas is another necessity for many, but that’s far more challenging to replace. Having alternatives for heating and cooking that can be powered if gas and electric grids go down is important. Have a backup for items that require power such as manual can openers. If you’re stuck eating canned foods for a while and all you have is an electric opener, you’ll have problems.
Don’t Forget the Protein
When most think about “prepping,” they think about their food supply. More Americans are turning to gardening and homesteading as ways to produce their own food. Others are working with local farmers and ranchers to purchase directly from the sources. This is a good idea whether doomsday comes or not, but it’s particularly important if the food supply chain is broken.
Most grocery stores have about one to two weeks worth of food, as do most American households. Grocers rely heavily on truckers to receive their ongoing shipments. In a crisis, the current process can fail. It behooves Americans for multiple reasons to localize their food purchases as much as possible.
Long-term storage is another popular option. Canned foods, MREs, and freeze dried meals are selling out quickly even as prices rise. But one component that is conspicuously absent in shelf-stable food is high-quality protein. Most survival food companies offer low quality “protein buckets” or cans of meat, but they are often barely edible.
Prepper All-Naturals offers premium cuts of steak that have been cooked sous vide and freeze dried to give them a 25-year shelf life. They offer Ribeye, NY Strip, and Tenderloin among others.
Having buckets of beans and rice is a good start, but keeping a solid supply of high-quality protein isn’t just healthier. It can help a family maintain normalcy through crises.
Prepare Without Fear
With all the challenges we face as Americans today, it can be emotionally draining. Citizens are scared and there’s nothing irrational about their concerns. Being prepared and making lifestyle changes to secure necessities can go a long way toward overcoming the fears that plague us. We should hope and pray for the best but prepare for the worst. And if the worst does come, then knowing we did what we could to be ready for it will help us face those challenges with confidence.
