X Close

Will America win from de-dollarisation? The power of other local currencies is growing

On the dole. (Alfred Gescheidt/Getty Images)

On the dole. (Alfred Gescheidt/Getty Images)


April 24, 2023   6 mins

The most important element in the debate over the utility of Western sanctions against Russia, is also the most ignored. The sanctions regime mostly comprises of restrictions that have been deployed before, such as export bans and the freezing of certain assets. Even the controversial exclusion of a number of Russian banks from the main international banking message system, SWIFT, was not exceptional, having already been used against Iran.

But the freezing of Russia’s foreign-exchange reserves, worth around $300 billion — about half of its overall reserves — was significant. While the US had behaved similarly with Afghanistan, Iran, Syria and Venezuela, none of these targets was remotely as powerful as Russia: a member of the G20, and the world’s largest nuclear power. Likewise, none of the 63 central banks that are members of the Bank for International Settlements (BIS) in Basel — known as the central bank of central banks — had ever been the target of financial sanctions, not even during the Second World War.

At the time, the decision received relatively little attention. Future historians, however, will look back on it as the trigger that set in motion one of the biggest snowball effects in history, one which now threatens the very foundations of the American Empire.

In our age of fiat money, reserves aren’t held in the form of physical dollars (or other currencies) stashed in the vaults of foreign central banks. They are simple IOUs — a credit recorded in the accounting sheets of the Federal Reserve and other central banks. In the dealings between countries, just as in the dealings between individuals or companies and commercial banks, trust is therefore fundamental: just as you would never deposit your salary in a bank if you had even the remotest fear that it might freeze or confiscate your money, no country wants to hold reserves which may be snatched away at any moment.

This move, therefore, violated an almost sacred principle: the neutrality of international reserves. The message was clear: from now on, the US would stop at nothing to punish countries that stepped out of line or defied Western diktats. And if this could happen to Russia, a major power whose central bank reserves were mostly earnings from sales to the West, it could happen to anyone. As Wolfgang Münchau wrote, by weaponising international reserves, the US had “taken the biggest gamble in the history of economic warfare”. In one fell swoop, he noted, the US had “undermined trust in the US dollar as the world’s main reserve currency”, and encouraged China and Russia to “bypass the Western financial infrastructure”. For non-Western nations — especially China, which is heavily exposed to US assets — disengaging from the dollar, and more in general from the US-led international monetary and financial system, acquired a sudden urgency.

De-dollarisation was not something that would happen overnight, that much was clear. But the wheels of history were set in motion. It is no coincidence that most of the world’s nations didn’t join the West in slapping sanctions on Russia, but quietly started strengthening their ties with Russia and China in an effort to reduce their dependence on the dollar-centric system. In just over 12 months, the world has undergone a greater tectonic shift, in geopolitical terms, than it has in decades: the long-heralded post-Western international order — comprising the BRICS and dozens of other countries making up most of the world’s population — has finally become a reality. The US, as former Treasury Secretary Larry Summers recently said, is lonelier than it has ever been.

A key driver of this process has been the world’s gradual disengagement from the dollar. Its demise has been endlessly — and wrongly — predicted since the Sixties, so scepticism here is justified. This time, however, there is good reason to believe that it’s happening. De-dollarisation comes in many forms, but three are particularly easy to spot: the settling of international transactions in currencies other than the dollar, primarily the Chinese yuan; the reduction of the dollar in global foreign-exchange reserves; and the decline in foreign holdings of US Treasury bonds.

On all counts, the trend seems clear. In terms of international payments, the role of the yuan (and other currencies) has received a massive boost over the past year. The most obvious example is Russia, which has effectively been forced by the Western sanctions to embrace the yuan for most of its international transactions. But several other major countries — including Brazil, Argentina, Pakistan and Bangladesh — have already agreed to (or are in the process of negotiating) the use of the yuan or their own currencies to settle their international transactions. Meanwhile, the BRICS are also working on developing an international currency along the lines of the synthetic alternative proposed by Keynes 70 years ago, the bancor, which was rejected by the Americans in favour of a system anchored around their dollar.

Beyond the BRICS, interest in de-dollarising — or at least in greater use of local currencies — is also growing, most notably in the Persian Gulf, where the US previously wielded unrivalled strategic power. At the first China-Gulf Arab States Cooperation Council summit in December reached a consensus to use yuan for oil and gas trade. And last month, China and the UAE conducted their first transaction in yuan.

Looking at the composition of global currency reserves, the shift towards de-dollarisation might be less apparent. But it is happening. The nothing-to-see-here crowd might point out that the US dollar still dominates the world’s currency reserves, with around 60% of the total, while the yuan accounts for less than 3%. But static snapshots of the present, though true, are of little use in understanding what the future holds. And, according to current trends, the dollar’s share of reserve currencies has begun to contract at 10 times the average speed of the past two decades. Central banks are mostly dumping dollars for gold, while overseas creditors — China, Japan and Saudi Arabia in particular — are increasingly selling off US Treasury bonds.

Such is the progress of de-dollarisation that many in the Western policy establishment are starting to acknowledge that this time is different. Last week, for instance, US Treasury Secretary Janet Yellen admitted that the weaponisation of the dollar through the use of financial sanctions risked undermining its hegemony by pushing countries to look for an alternative, even if its supremacy wasn’t at risk soon. Just two days later, Christine Lagarde, the President of the ECB, made a similar statement, acknowledging that there was now “an opportunity for certain countries seeking to reduce their dependence on Western payment systems and currency frameworks”. She stressed that these changes do not amount to an “imminent loss of dominance for the US dollar or the euro”, but they do “suggest that international currency status should no longer be taken for granted”. The question, then, is no longer if de-dollarisation is happening — but how fast.

Sceptics, however, continue to argue that there are insurmountable technical and institutional obstacles to the dollar’s decline. They point out, for instance, that there are economies of scale that lead to a relative monopoly in reserve currency status, and that the Chinese yuan cannot become a real reserve currency unless capital controls are phased out and the exchange rate made more flexible. Moreover, they claim, a reserve currency country needs to accept — as the US has — permanent current account deficits in order to satisfy the world’s demand for its currency.

Therefore, there would need to be major changes in China’s financial markets and monetary-economic policies for the yuan to replace the dollar. These are valid claims, but they miss a fundamental point: the de-dollarisation process is primarily geopolitical in nature, not economic. It’s not just about finding an “efficient” system, but about challenging Western monetary hegemony. Moreover, de-dollarisation doesn’t necessarily mean the replacement of the dollar with the yuan, but the dispersion of reserve assets among several major currencies, and other assets, such as commodities such as gold.

And this would be no bad thing. The world’s reliance on the dollar makes economies excessively exposed to changes in US monetary policy, with periods of monetary loosening or, as now, tightening having dramatic knock-on effects on the rest of the world. Nor would this completely be to America’s disadvantage. As Michael Pettis and Matthew Klein argue, the current international and monetary financial system doesn’t pit the interests of nations against each other so much as it pits the interests of certain economic sectors against other economic sectors. In other words, it is not the US as a whole that benefits from the global dominance of the dollar, but rather certain constituencies within the US.

By attracting capital to the US and allowing it to help itself to foreign goods and resources such as oil, simply by printing its own currency — in what Valéry Giscard d’Estaing, de Gaulle’s Minister of Economy, called America’s “exorbitant privilege” — dollar dominance has undoubtedly benefited America’s imperial elites: Wall Street, large global corporations and, most importantly, the national security establishment. It’s what has allowed the US to sustain a regime of perpetual war, on top of exercising financial dominance over much of the world.

But this has come at a significant cost not only for the rest of the world but also for American workers, farmers, producers and small businesses. For America, supporting the world’s primary reserve currency has meant running permanent trade deficits, which has seriously eroded its industrial and manufacturing capacity and its ability to provide well-paying jobs to its workforce — what Pettis calls the “exorbitant burden” of the dollar. The end of this supremacy, then, would turn America into a somewhat “normal” country — a regional power among other regional powers. Both globally and within the US, this would benefit virtually everyone. Indeed, the only losers would be those who have had ample time to enrich themselves.


Thomas Fazi is an UnHerd columnist and translator. His latest book is The Covid Consensus, co-authored with Toby Green.

battleforeurope

Join the discussion


Join like minded readers that support our journalism by becoming a paid subscriber


To join the discussion in the comments, become a paid subscriber.

Join like minded readers that support our journalism, read unlimited articles and enjoy other subscriber-only benefits.

Subscribe
Subscribe
Notify of
guest

46 Comments
Most Voted
Newest Oldest
Inline Feedbacks
View all comments
Nell Clover
NC
Nell Clover
1 year ago

The author seems to be under the illusion that the West will re-shore industry after a brief decline and this will allow the West to bounce back. Sadly, this is not the case.

Prices, wages and regulations are sticky. The West will not be competitive for decades to come.

Industry is capital plant intensive. The world already has plenty of industrial capacity in Asia. Combined with a decline in Western consumption due to its impending impoverishment, it will never be economic to rebuild lost capital plant in the West. Asia will have the edge thanks to its existing industry.

What we’ve witnessed is a game of musical chairs for industrial production. The music has stopped and Asia once again finds itself at the economic centre of the world

The West heaped its own pyre for short term gain. Knowing this, you can see the attraction of Net Zero for Western governments: a laudable excuse for declining living standards, a fig leaf for a painful and inevitable readjustment.

Last edited 1 year ago by Nell Clover
Philippe W
PW
Philippe W
1 year ago
Reply to  Nell Clover

that fig leaf of yours – made from ethical eco-friendly hemp textile in a sustainable factory I hope – will also function as a veil for trade protectionism. i.e. should you find yourself unable to compete with said overseas industries, slap a transport of overseas goods climate emergency polar bear co2 tax on them

rob drummond
RD
rob drummond
1 year ago
Reply to  Nell Clover

.

Last edited 1 year ago by rob drummond
tim richardson
TR
tim richardson
1 year ago
Reply to  Nell Clover

The West will not be competitive with who? China is the biggest loser in the breakdown of the globalized economy. Is Russia going to replace America as China’s biggest customer? Not likely.

Philippe W
PW
Philippe W
1 year ago
Reply to  Nell Clover

that fig leaf of yours – made from ethical eco-friendly hemp textile in a sustainable factory I hope – will also function as a veil for trade protectionism. i.e. should you find yourself unable to compete with said overseas industries, slap a transport of overseas goods climate emergency polar bear co2 tax on them

rob drummond
RD
rob drummond
1 year ago
Reply to  Nell Clover

.

Last edited 1 year ago by rob drummond
tim richardson
TR
tim richardson
1 year ago
Reply to  Nell Clover

The West will not be competitive with who? China is the biggest loser in the breakdown of the globalized economy. Is Russia going to replace America as China’s biggest customer? Not likely.

Nell Clover
NC
Nell Clover
1 year ago

The author seems to be under the illusion that the West will re-shore industry after a brief decline and this will allow the West to bounce back. Sadly, this is not the case.

Prices, wages and regulations are sticky. The West will not be competitive for decades to come.

Industry is capital plant intensive. The world already has plenty of industrial capacity in Asia. Combined with a decline in Western consumption due to its impending impoverishment, it will never be economic to rebuild lost capital plant in the West. Asia will have the edge thanks to its existing industry.

What we’ve witnessed is a game of musical chairs for industrial production. The music has stopped and Asia once again finds itself at the economic centre of the world

The West heaped its own pyre for short term gain. Knowing this, you can see the attraction of Net Zero for Western governments: a laudable excuse for declining living standards, a fig leaf for a painful and inevitable readjustment.

Last edited 1 year ago by Nell Clover
Elliott Bjorn
EB
Elliott Bjorn
1 year ago

”The question, then, is no longer if de-dollarisation is happening — but how fast.”

Exactly – we need to take notice and begin planning for the inevitable…much as the sun will cool freezing the planets till it goes Red Giant and cooks them to gasses…It is not IF that is happening, but When!

But then this O level economics level paper does fail to mention the big points.

No currency in the world, nor any BIS, World Bank, IMF, China Central Bank, BRICS BANK, none for several decades – could produce a Bond Market which could handle Reserve Collateral Status which the FED – Treasury does. Basel III is allowing gold to be Teir I, but BRICS IOUs are still a long way off for being that. This is one reason Treasures are selling and gold bought – but gold is a Tiny amount in existence compared to $ in the world. maybe 1% of the value, and more gold cannot be printed, it is very finite and small.

Sure you can pay for Oil and Manganese ore in yen or Lira – in what amounts as Barter, because you can not then hold that currency as collateral, or really as a store of value. For that you go back to Treasuries. You confuse Reserve Currency for BRICS essentially bartering for goods with local currencies, which then are stored in Treasuries once the trade is done.

George Gammon did a good show today on the Dollar (Q&A, youtube – he is the go to on learning macro economics). He talked of where he lives, Columbia where the $ is the money of 4 generations when they want to put some aside. Or his trip to Turkey and how the people spent their Lira, but put leftovers into $ so they would retain value. He says governments may trade their monopoly products in their currencies – but the businessman will always want $ when they do trades, because they have $ debt, and they know the system and security – they know $ will always do what works.
Basically the Governments may barter with each other in local Fiat, only that is barter, NOT a Reserve Currency – And the Global people want $$$$ because it works.

Have you ever heard of ‘EuroDollars‘? It is impossible to understand the global $ without understanding them.

Basically a foreign International Bank loans $100,000,000 to a Chilean copper mine developer (say). They Loan it in USA $ ! Money is created by it being loaned into existence. This non-USA Bank just loaned $100,000,000 into existence – IN Dollars! The Bank is not American, it has nothing to do with the FED or USA Treasury – but it created a hundred million USA $ by loaning it into existence. This is Real, and huge.

Now the copper mine has to have USA $ to service its debt to a foreign bank! Nothing to do with USA! so the Chilean mine has to have $ to pay. Trillions of these EuroDollars exist – Many Trillions!

You know how we say AI will escape into the wild on the computer networks? The USA$ has done that on the Economic networks! Haha….

It is all so much more complex that this back of a Cornflakes Box blurb…. The USA Dollar is like Oil – it is going to be around a lot longer than people say because (unlike windmills) it is what works to keep the system running. haha…check out

EuroDollar University on Youtube….

rob drummond
RD
rob drummond
1 year ago
Reply to  Elliott Bjorn

I e njnoued your article above and will check out that Video – but whilst what you say may well (also) be true: there is no doubt The USA has forced other cojnntries (Russia appears to be the prime example) into trading in non US$$.

Over time, it would appear more and more will – if only because China wants to and they will force people to trade in their currency (I imagine) – so whilst I dotn dissagree with you that it will take time……in my opinion the De-$$-orisation has already started, it may proceed slowly and stop half way even – but its definately started.

Nicky Samengo-Turner
NS
Nicky Samengo-Turner
1 year ago
Reply to  Elliott Bjorn

Hear hear and well said! Thank you for your expertise, somewhat rare on this medium: I was myself going to comment on the piece, but, despite the gross and unsubstantiated innacuracies, and authors woeful reaearch, and lack of knowledge and understanding, I felt that the piece itself displayed the asininity advertisement needed!

Warren Trees
WT
Warren Trees
1 year ago

Oh, but please, please regale us with your superior intellect on these matters. And thank you for taking the time to read these pieces daily and blessing us with your comments, many of which are apparently offered after consuming a bit too much of your favorite elixir. We thick boned serfs simply can’t wait for your daily dose of enlightenment.

Nicky Samengo-Turner
NS
Nicky Samengo-Turner
1 year ago
Reply to  Warren Trees

If your to dense to understand go back to scewel.. and PS I don’t drink bigotcretin

Peter Lee
PL
Peter Lee
11 months ago

Your????

Peter Lee
PL
Peter Lee
11 months ago

Your????

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago
Reply to  Warren Trees

If your to dense to understand go back to scewel.. and PS I don’t drink bigotcretin

Warren Trees
WT
Warren Trees
1 year ago

Oh, but please, please regale us with your superior intellect on these matters. And thank you for taking the time to read these pieces daily and blessing us with your comments, many of which are apparently offered after consuming a bit too much of your favorite elixir. We thick boned serfs simply can’t wait for your daily dose of enlightenment.

rob drummond
RD
rob drummond
1 year ago
Reply to  Elliott Bjorn

I e njnoued your article above and will check out that Video – but whilst what you say may well (also) be true: there is no doubt The USA has forced other cojnntries (Russia appears to be the prime example) into trading in non US$$.

Over time, it would appear more and more will – if only because China wants to and they will force people to trade in their currency (I imagine) – so whilst I dotn dissagree with you that it will take time……in my opinion the De-$$-orisation has already started, it may proceed slowly and stop half way even – but its definately started.

Nicky Samengo-Turner
NS
Nicky Samengo-Turner
1 year ago
Reply to  Elliott Bjorn

Hear hear and well said! Thank you for your expertise, somewhat rare on this medium: I was myself going to comment on the piece, but, despite the gross and unsubstantiated innacuracies, and authors woeful reaearch, and lack of knowledge and understanding, I felt that the piece itself displayed the asininity advertisement needed!

Elliott Bjorn
EB
Elliott Bjorn
1 year ago

”The question, then, is no longer if de-dollarisation is happening — but how fast.”

Exactly – we need to take notice and begin planning for the inevitable…much as the sun will cool freezing the planets till it goes Red Giant and cooks them to gasses…It is not IF that is happening, but When!

But then this O level economics level paper does fail to mention the big points.

No currency in the world, nor any BIS, World Bank, IMF, China Central Bank, BRICS BANK, none for several decades – could produce a Bond Market which could handle Reserve Collateral Status which the FED – Treasury does. Basel III is allowing gold to be Teir I, but BRICS IOUs are still a long way off for being that. This is one reason Treasures are selling and gold bought – but gold is a Tiny amount in existence compared to $ in the world. maybe 1% of the value, and more gold cannot be printed, it is very finite and small.

Sure you can pay for Oil and Manganese ore in yen or Lira – in what amounts as Barter, because you can not then hold that currency as collateral, or really as a store of value. For that you go back to Treasuries. You confuse Reserve Currency for BRICS essentially bartering for goods with local currencies, which then are stored in Treasuries once the trade is done.

George Gammon did a good show today on the Dollar (Q&A, youtube – he is the go to on learning macro economics). He talked of where he lives, Columbia where the $ is the money of 4 generations when they want to put some aside. Or his trip to Turkey and how the people spent their Lira, but put leftovers into $ so they would retain value. He says governments may trade their monopoly products in their currencies – but the businessman will always want $ when they do trades, because they have $ debt, and they know the system and security – they know $ will always do what works.
Basically the Governments may barter with each other in local Fiat, only that is barter, NOT a Reserve Currency – And the Global people want $$$$ because it works.

Have you ever heard of ‘EuroDollars‘? It is impossible to understand the global $ without understanding them.

Basically a foreign International Bank loans $100,000,000 to a Chilean copper mine developer (say). They Loan it in USA $ ! Money is created by it being loaned into existence. This non-USA Bank just loaned $100,000,000 into existence – IN Dollars! The Bank is not American, it has nothing to do with the FED or USA Treasury – but it created a hundred million USA $ by loaning it into existence. This is Real, and huge.

Now the copper mine has to have USA $ to service its debt to a foreign bank! Nothing to do with USA! so the Chilean mine has to have $ to pay. Trillions of these EuroDollars exist – Many Trillions!

You know how we say AI will escape into the wild on the computer networks? The USA$ has done that on the Economic networks! Haha….

It is all so much more complex that this back of a Cornflakes Box blurb…. The USA Dollar is like Oil – it is going to be around a lot longer than people say because (unlike windmills) it is what works to keep the system running. haha…check out

EuroDollar University on Youtube….

j watson
JW
j watson
1 year ago

There is a basic issue here. A reserve currency gains popularity on the perception of security and resilience of the issuing country. Now because the West and the US has freedom of speech we hear much more about the travails and ebbs and flows of international and societal challenges. It can make one start to think we have less security, less resilience. Whereas in fact it’s demonstrating the reverse. And Central Banks are pretty hard nosed and ‘get’ which is the more stable currency as a result.
Of course some ‘hedging’ goes on. More neutral countries inevitably look to navigate ambiguity on which way they lean to extract the best deals. But let’s see where they flock if conflict over Taiwan blocks the South China sea.
Finally the fact the West has a free discussion about this means policy will evolve and US will adapt its approach. It’s because people can speak truth to power in Washington that you can have a bit more faith lessons can be learned. There’s no speaking ‘truth to power’ in Beiing or Moscow.

tim richardson
TR
tim richardson
1 year ago
Reply to  j watson

“It was the best of times; it was the worst of times…”

Peter Johnson
PJ
Peter Johnson
1 year ago
Reply to  j watson

Well the US, UK, Canada, New Zealand and others are actively trying to impose censorship regimes – so there won’t be much ‘truth to power’ there either. Covid policy was a case in point.

j watson
JW
j watson
1 year ago
Reply to  Peter Johnson

I think our pluralism in the West checks and prevents anything like the state censorship you’d find in Russia or China if you lived there PJ. UnHerd would not exist in either for a start.

Last edited 1 year ago by j watson
Robert Taylor
RT
Robert Taylor
11 months ago
Reply to  j watson

That may be the case today but tomorrow is a different story entirely. The West is transitioning to an authoritarian state far faster than de-dollarisation. Did our ‘pluralism’ prevent people losing their jobs for exercising their choice to decline being jabbed with barely tested experimental ‘vaccines’?

Robert Taylor
RT
Robert Taylor
11 months ago
Reply to  j watson

That may be the case today but tomorrow is a different story entirely. The West is transitioning to an authoritarian state far faster than de-dollarisation. Did our ‘pluralism’ prevent people losing their jobs for exercising their choice to decline being jabbed with barely tested experimental ‘vaccines’?

j watson
JW
j watson
1 year ago
Reply to  Peter Johnson

I think our pluralism in the West checks and prevents anything like the state censorship you’d find in Russia or China if you lived there PJ. UnHerd would not exist in either for a start.

Last edited 1 year ago by j watson
Mike Howlett
MH
Mike Howlett
1 year ago
Reply to  j watson

Wise words, Watson! Also, I don’t hear enough said about what will be the major market for China if the West goes broke and can’t buy all the stuff they make. Where will the new market be? India? South America? Africa? Iran, Iraq, Syria? Egypt, Libya, Morocco? Am I missing something? Any ideas?

tim richardson
TR
tim richardson
1 year ago
Reply to  j watson

“It was the best of times; it was the worst of times…”

Peter Johnson
PJ
Peter Johnson
1 year ago
Reply to  j watson

Well the US, UK, Canada, New Zealand and others are actively trying to impose censorship regimes – so there won’t be much ‘truth to power’ there either. Covid policy was a case in point.

Mike Howlett
MH
Mike Howlett
1 year ago
Reply to  j watson

Wise words, Watson! Also, I don’t hear enough said about what will be the major market for China if the West goes broke and can’t buy all the stuff they make. Where will the new market be? India? South America? Africa? Iran, Iraq, Syria? Egypt, Libya, Morocco? Am I missing something? Any ideas?

j watson
JW
j watson
1 year ago

There is a basic issue here. A reserve currency gains popularity on the perception of security and resilience of the issuing country. Now because the West and the US has freedom of speech we hear much more about the travails and ebbs and flows of international and societal challenges. It can make one start to think we have less security, less resilience. Whereas in fact it’s demonstrating the reverse. And Central Banks are pretty hard nosed and ‘get’ which is the more stable currency as a result.
Of course some ‘hedging’ goes on. More neutral countries inevitably look to navigate ambiguity on which way they lean to extract the best deals. But let’s see where they flock if conflict over Taiwan blocks the South China sea.
Finally the fact the West has a free discussion about this means policy will evolve and US will adapt its approach. It’s because people can speak truth to power in Washington that you can have a bit more faith lessons can be learned. There’s no speaking ‘truth to power’ in Beiing or Moscow.

Christopher Barclay
CB
Christopher Barclay
1 year ago

‘For America, …. running permanent trade deficits … has seriously eroded its industrial and manufacturing capacity and its ability to provide well-paying jobs to its workforce …’ Simply not true. Running a permanent surplus in its capital account, the mirror image of a permanent deficit in the current account, could have meant high levels of investment in industries paying high salaries. The ruling class in the US simply chose to export industry to drive down the prices they themselves paid and because they loathe their own working class.

Peter B
PB
Peter B
1 year ago

You are forgetting the obvious fact that the American middle and working classes have been very happy to accept the tradeoff of cheaper products from global outsourcing. Someone buys all those iPhones. Trying to overlay some class war narrative on this just doesn’t wash.

Warren Trees
Warren Trees
1 year ago
Reply to  Peter B

Only in the U.S. is a $900 phone considered a cheap product.

Ray Andrews
RA
Ray Andrews
1 year ago
Reply to  Peter B

The attempt at a morality play fails. Individually people will naturally do what is to their advantage even if they know that collectively it harms the whole country. What they would ask for, and not get, is a government that makes global rules that will protect the interests of all working people.
Consider taxes: Like everyone else I pay the lowest taxes I can. At the same time I will vote for a government that closes any loopholes I might have found *just so long as that government closes those loopholes for all the other cheaters too*. In short, you confuse individual morality for collective morality.

Warren Trees
Warren Trees
1 year ago
Reply to  Peter B

Only in the U.S. is a $900 phone considered a cheap product.

Ray Andrews
RA
Ray Andrews
1 year ago
Reply to  Peter B

The attempt at a morality play fails. Individually people will naturally do what is to their advantage even if they know that collectively it harms the whole country. What they would ask for, and not get, is a government that makes global rules that will protect the interests of all working people.
Consider taxes: Like everyone else I pay the lowest taxes I can. At the same time I will vote for a government that closes any loopholes I might have found *just so long as that government closes those loopholes for all the other cheaters too*. In short, you confuse individual morality for collective morality.

Peter B
Peter B
1 year ago

You are forgetting the obvious fact that the American middle and working classes have been very happy to accept the tradeoff of cheaper products from global outsourcing. Someone buys all those iPhones. Trying to overlay some class war narrative on this just doesn’t wash.

Christopher Barclay
CB
Christopher Barclay
1 year ago

‘For America, …. running permanent trade deficits … has seriously eroded its industrial and manufacturing capacity and its ability to provide well-paying jobs to its workforce …’ Simply not true. Running a permanent surplus in its capital account, the mirror image of a permanent deficit in the current account, could have meant high levels of investment in industries paying high salaries. The ruling class in the US simply chose to export industry to drive down the prices they themselves paid and because they loathe their own working class.

J Guy
TG
J Guy
1 year ago

Oh, no, not another article reporting on the imminent end of America, the dollar, and whatever else they don’t like. I thought yesterday’s screed from the Arch-Druid Poohbah was my recommended weekly allowance of this…

Peter B
PB
Peter B
1 year ago
Reply to  J Guy

Yes, it’s all there, isn’t it ?
Superficially convincing. “America’s imperial elites”. The “exorbitant privilege” of the US/dollar – a point he almost immediately contradicts by talking about the “exorbitant burden” on the US.
In reality, much of this is driven by resentment at the success of the US. Certainly in the case of the French.
But let’s go back to this quote from Fazi:
“In the dealings between countries, just as in the dealings between individuals or companies and commercial banks, trust is therefore fundamental: just as you would never deposit your salary in a bank if you had even the remotest fear that it might freeze or confiscate your money, no country wants to hold reserves which may be snatched away at any moment.”
Precisely. Trust is the bedrock of a financial system.
And this is precisely why the rich in countries like Russia choose to park their wealth in places like London or Switzerland. And why the US dollar and Swiss Franc are safe haven currencies (still true of the US dollar in the most recent crises).
Tell me again – the group of lowest trust countries out there (Russian, China, Iran, …) with the worst record on rule of law and protection of private property and liberty are going to set up some new international financial system which will supplant the Western one.

leonard o'reilly
leonard o'reilly
1 year ago
Reply to  J Guy

Agreed.
Unherd has many strengths. Economic analysis is not amongst them. It was truly boneheaded to have seized Russian FX reserves, as Fazi says, a move executed by boneheaded people. What troubles me is the way Fazi melodramatizes the consequences and seems to take some glee in it.
The U.S. as a mere regional power is not a prospect anyone should be sanguine about ( for all that country’s faults, abusing their reserve currency status being amongst them ).
As a hegemon, and not even setting aside its atrocious governance, name me a cleaner dirty shirt out there.
And for pity’s sake, don’t say the EU. After all the good the old country bequeathed us, she also gave us the Continental philosophers, the source of our social dysphoria.

Last edited 1 year ago by leonard o'reilly
Elliott Bjorn
EB
Elliott Bjorn
1 year ago
Reply to  J Guy

I do not understand how they have that creepy, and not knowledgeable, guy writing on here. I think it is as weird they select him to write for Unherd as it is for Budweiser to have chosen Dylan Mulvaney to be their rep. It obviously seems like a good idea to the ones in charge here, so I guess it is their choice.

Next they need that Japanese guy who lives wearing a collie dog costume to do articles on feminism. Round out the writing staff, get more inclusive.

P.S. for an Excellent Peter Schiff live Sunday on youtube today – https://www.youtube.com/watch?v=nKC4bWOv2-o
The last 1/4 is where he pronounces doom on us all – fascinating, scary…

He says USA is toast. The Boomers killed the country with voting in Deficit spending – and now us Boomers are all to go broke because USA is Broke. We killed it and though it is still walking he recons it has not got much further before it hits the dirt.

Basically with 3 items:

Interest on the debt

Social Security (state old age pension)

Medicare (free Medical for over 65 year olds, and for poor people)

90%, yes, 90% !! of all USA tax revenues is consumed. In a couple more years it will be 100%. Then 110%… meanwhile every other FED expense is Borrowed/Printed. Military, education, welfare, transport, and the vast, huge, Deep State, and so on.

Schiff says in about 10 years they will need a wall at the border to stop the ones with good job skills from Leaving the County, because we will be some kind of Stalinist starving mess. And what is frightening is Peter Schiff is a very credible finance guy. Schiff did a 1.5 hour interview with Jordan Peterson today – to be released next week – that is a Must See. Take your Xanax before watching though…..

Charles Stanhope
Charles Stanhope
1 year ago
Reply to  Elliott Bjorn

Welcome back!
An attack of CMF* perhaps?

(* Chinese Manufactured Flu.)

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

I am pleased that commentators have cottoned on the the low level of Unherd’s economics and capital markets scribble!

Charles Stanhope
CS
Charles Stanhope
1 year ago

“Rome wasn’t built in a day”.

Charles Stanhope
CS
Charles Stanhope
1 year ago

“Rome wasn’t built in a day”.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

I am pleased that commentators have cottoned on the the low level of Unherd’s economics and capital markets scribble!

Jeff Watkins
Jeff Watkins
1 year ago
Reply to  Elliott Bjorn

In all fairness to Fazi and the Archdruid they do write convincingly and clearly about a major issue which is not been coveredat all by the MSM in the UK at least. As you point out in your earlier comment ”The question is no longer if de-dollarisation is happening — but how fast.” Looking forward to Schiffs interview with Jordan Peterson – perhaps that will provide an answer.

Charles Stanhope
Charles Stanhope
1 year ago
Reply to  Elliott Bjorn

Welcome back!
An attack of CMF* perhaps?

(* Chinese Manufactured Flu.)

Jeff Watkins
JW
Jeff Watkins
1 year ago
Reply to  Elliott Bjorn

In all fairness to Fazi and the Archdruid they do write convincingly and clearly about a major issue which is not been coveredat all by the MSM in the UK at least. As you point out in your earlier comment ”The question is no longer if de-dollarisation is happening — but how fast.” Looking forward to Schiffs interview with Jordan Peterson – perhaps that will provide an answer.

dave dobbin
dave dobbin
1 year ago
Reply to  J Guy

Define imminent. Fazi and the Druid are talking about the direction of travel. It doesn’t happen next year.

Peter B
Peter B
1 year ago
Reply to  J Guy

Yes, it’s all there, isn’t it ?
Superficially convincing. “America’s imperial elites”. The “exorbitant privilege” of the US/dollar – a point he almost immediately contradicts by talking about the “exorbitant burden” on the US.
In reality, much of this is driven by resentment at the success of the US. Certainly in the case of the French.
But let’s go back to this quote from Fazi:
“In the dealings between countries, just as in the dealings between individuals or companies and commercial banks, trust is therefore fundamental: just as you would never deposit your salary in a bank if you had even the remotest fear that it might freeze or confiscate your money, no country wants to hold reserves which may be snatched away at any moment.”
Precisely. Trust is the bedrock of a financial system.
And this is precisely why the rich in countries like Russia choose to park their wealth in places like London or Switzerland. And why the US dollar and Swiss Franc are safe haven currencies (still true of the US dollar in the most recent crises).
Tell me again – the group of lowest trust countries out there (Russian, China, Iran, …) with the worst record on rule of law and protection of private property and liberty are going to set up some new international financial system which will supplant the Western one.

leonard o'reilly
leonard o'reilly
1 year ago
Reply to  J Guy

Agreed.
Unherd has many strengths. Economic analysis is not amongst them. It was truly boneheaded to have seized Russian FX reserves, as Fazi says, a move executed by boneheaded people. What troubles me is the way Fazi melodramatizes the consequences and seems to take some glee in it.
The U.S. as a mere regional power is not a prospect anyone should be sanguine about ( for all that country’s faults, abusing their reserve currency status being amongst them ).
As a hegemon, and not even setting aside its atrocious governance, name me a cleaner dirty shirt out there.
And for pity’s sake, don’t say the EU. After all the good the old country bequeathed us, she also gave us the Continental philosophers, the source of our social dysphoria.

Last edited 1 year ago by leonard o'reilly
Elliott Bjorn
Elliott Bjorn
1 year ago
Reply to  J Guy

I do not understand how they have that creepy, and not knowledgeable, guy writing on here. I think it is as weird they select him to write for Unherd as it is for Budweiser to have chosen Dylan Mulvaney to be their rep. It obviously seems like a good idea to the ones in charge here, so I guess it is their choice.

Next they need that Japanese guy who lives wearing a collie dog costume to do articles on feminism. Round out the writing staff, get more inclusive.

P.S. for an Excellent Peter Schiff live Sunday on youtube today – https://www.youtube.com/watch?v=nKC4bWOv2-o
The last 1/4 is where he pronounces doom on us all – fascinating, scary…

He says USA is toast. The Boomers killed the country with voting in Deficit spending – and now us Boomers are all to go broke because USA is Broke. We killed it and though it is still walking he recons it has not got much further before it hits the dirt.

Basically with 3 items:

Interest on the debt

Social Security (state old age pension)

Medicare (free Medical for over 65 year olds, and for poor people)

90%, yes, 90% !! of all USA tax revenues is consumed. In a couple more years it will be 100%. Then 110%… meanwhile every other FED expense is Borrowed/Printed. Military, education, welfare, transport, and the vast, huge, Deep State, and so on.

Schiff says in about 10 years they will need a wall at the border to stop the ones with good job skills from Leaving the County, because we will be some kind of Stalinist starving mess. And what is frightening is Peter Schiff is a very credible finance guy. Schiff did a 1.5 hour interview with Jordan Peterson today – to be released next week – that is a Must See. Take your Xanax before watching though…..

dave dobbin
dave dobbin
1 year ago
Reply to  J Guy

Define imminent. Fazi and the Druid are talking about the direction of travel. It doesn’t happen next year.

J Guy
TG
J Guy
1 year ago

Oh, no, not another article reporting on the imminent end of America, the dollar, and whatever else they don’t like. I thought yesterday’s screed from the Arch-Druid Poohbah was my recommended weekly allowance of this…

rob drummond
rob drummond
1 year ago

The USA lead the policy (possibly fueled by greed of cost cutting) of ”off-shoring” – iphones is a primary example. Made in China for a bout $5 each – it enables the chinese (and others in Asia) to steal that tech – duplicate it and then develop their own industries.
US and the West taught Asia quality control, (remember we used to laugh at ”made in china?”) they learned quickly. Companies such as Samsung Foxconn and many others were catapulted from obscurity into major global players – with the huge advantage of having ”ready made” tech – for this they only had to develop, not invent. If this wasn’t true – how come these companies are constantly and for decades are locked in legal battles over Copyright infringement?
I remember many US Presidents for decades going on about out-sorcing and how it was all good for globalisation – well USA, you had better get used to the idea of losing your hedgemony – not long now.

Last edited 1 year ago by rob drummond
Peter B
PB
Peter B
1 year ago
Reply to  rob drummond

Except that outsourcing iPhone production to China is actually working our pretty well for Apple and the US. At the last report, Apple had $400bn annual sales with $100bn net profits and paid $20bn in taxes (not enough, I know). And all the key technology and highly paid jobs in this case remain in the US (and the chip manufacturing in Taiwan).

rob drummond
rob drummond
11 months ago
Reply to  Peter B

yes – everyone knows that. it wasnt my point but thank you for your comment.

rob drummond
rob drummond
11 months ago
Reply to  Peter B

yes – everyone knows that. it wasnt my point but thank you for your comment.

zee upītis
zee upītis
1 year ago
Reply to  rob drummond

I suggest you to read on history of Samsung, heavily investing in R&D since at least eighties and has shitloads of patents to its name, not to mention being the leading semiconductor manufacturer outside of Taiwan. It’s more akin to the large Japanese electronics conglomerates than the Chinese companies that have recently sprung up — although those too have been consistently innovating during the last decade. As about legal battles, who doesn’t? It’s more of an American thing, in fact 🙂

rob drummond
RD
rob drummond
11 months ago
Reply to  zee upītis

No one can cram into 10 years (or lets say 15 then) the development of the sort of tech these companies came out with in next to no time.
Not even the Asians are that smart. Tech was stolen – check the Court cases, never mind the patents. The Whittle Jet-engine patents were lodged in 1930 – sadly the Patent expired and The Germans were first to get it into the air.
I have no doubt many Asian companies registered patents all over the place (just as The Chinese have with Manchesters Graphine) – but did they work? (rhetorical question)
In the case of ‘Chinese Grahine Patents’ (there are well over 1,000) the consensus is many dont actually work – its LAND GRAB and is all set jup for copy-right ingringement for the future – rather like Apple and Samsung say.
Tech was lifted en-masse from The West (why does the Chinese equivilant look identical to US F-35 jet? – why did Concordski look identical to Concorde?)
At the end of the day, it mostly came from US Space development – which boosted the science base like nothing else – at that time most of Asia (includign China) were still largely p*ssing in the woods.

ps: I do agree Russian ”won” the Space race – but in the end it all boils down to German scientists from WW2.

rob drummond
RD
rob drummond
11 months ago
Reply to  zee upītis

No one can cram into 10 years (or lets say 15 then) the development of the sort of tech these companies came out with in next to no time.
Not even the Asians are that smart. Tech was stolen – check the Court cases, never mind the patents. The Whittle Jet-engine patents were lodged in 1930 – sadly the Patent expired and The Germans were first to get it into the air.
I have no doubt many Asian companies registered patents all over the place (just as The Chinese have with Manchesters Graphine) – but did they work? (rhetorical question)
In the case of ‘Chinese Grahine Patents’ (there are well over 1,000) the consensus is many dont actually work – its LAND GRAB and is all set jup for copy-right ingringement for the future – rather like Apple and Samsung say.
Tech was lifted en-masse from The West (why does the Chinese equivilant look identical to US F-35 jet? – why did Concordski look identical to Concorde?)
At the end of the day, it mostly came from US Space development – which boosted the science base like nothing else – at that time most of Asia (includign China) were still largely p*ssing in the woods.

ps: I do agree Russian ”won” the Space race – but in the end it all boils down to German scientists from WW2.

Peter B
PB
Peter B
1 year ago
Reply to  rob drummond

Except that outsourcing iPhone production to China is actually working our pretty well for Apple and the US. At the last report, Apple had $400bn annual sales with $100bn net profits and paid $20bn in taxes (not enough, I know). And all the key technology and highly paid jobs in this case remain in the US (and the chip manufacturing in Taiwan).

zee upītis
zee upītis
1 year ago
Reply to  rob drummond

I suggest you to read on history of Samsung, heavily investing in R&D since at least eighties and has shitloads of patents to its name, not to mention being the leading semiconductor manufacturer outside of Taiwan. It’s more akin to the large Japanese electronics conglomerates than the Chinese companies that have recently sprung up — although those too have been consistently innovating during the last decade. As about legal battles, who doesn’t? It’s more of an American thing, in fact 🙂

rob drummond
RD
rob drummond
1 year ago

The USA lead the policy (possibly fueled by greed of cost cutting) of ”off-shoring” – iphones is a primary example. Made in China for a bout $5 each – it enables the chinese (and others in Asia) to steal that tech – duplicate it and then develop their own industries.
US and the West taught Asia quality control, (remember we used to laugh at ”made in china?”) they learned quickly. Companies such as Samsung Foxconn and many others were catapulted from obscurity into major global players – with the huge advantage of having ”ready made” tech – for this they only had to develop, not invent. If this wasn’t true – how come these companies are constantly and for decades are locked in legal battles over Copyright infringement?
I remember many US Presidents for decades going on about out-sorcing and how it was all good for globalisation – well USA, you had better get used to the idea of losing your hedgemony – not long now.

Last edited 1 year ago by rob drummond
Alan Gore
Alan Gore
1 year ago

The traditional error signal for currency exchange value changes is gold. If central banks really were “dumping dollars for gold” we would see the dollar price of gold surging. This hasn’t happened. The gold price in USD has been stuck at $2,000 for years.

Alan Gore
Alan Gore
1 year ago

The traditional error signal for currency exchange value changes is gold. If central banks really were “dumping dollars for gold” we would see the dollar price of gold surging. This hasn’t happened. The gold price in USD has been stuck at $2,000 for years.

Dougie Undersub
Dougie Undersub
1 year ago

The US has certainly taken advantage of the status of the dollar as a reserve currency but other countries tempted to replace it with the yuan should sup with a very long spoon.

Dougie Undersub
Dougie Undersub
1 year ago

The US has certainly taken advantage of the status of the dollar as a reserve currency but other countries tempted to replace it with the yuan should sup with a very long spoon.

Reginald Duquesnoy
RD
Reginald Duquesnoy
1 year ago

Give back to Caesar, what belongs to…”The dollar’s exorbitant privilege was first used by Charles de Gaulle, no friend of subservience in any form to the Anglo-sphere, and not by Giscard, a rabid Atlanticist.
And the originator of the formulation was probably Jacques Rueff, de Gaulle’s economic adviser, and the polar opposite of Jean Monnet, the CIA stooge, who brought it about.
Qu’on se le dise!

Reginald Duquesnoy
RD
Reginald Duquesnoy
1 year ago

Give back to Caesar, what belongs to…”The dollar’s exorbitant privilege was first used by Charles de Gaulle, no friend of subservience in any form to the Anglo-sphere, and not by Giscard, a rabid Atlanticist.
And the originator of the formulation was probably Jacques Rueff, de Gaulle’s economic adviser, and the polar opposite of Jean Monnet, the CIA stooge, who brought it about.
Qu’on se le dise!

B Emery
B Emery
1 year ago

Are we allowed to talk about the x date yet. Does anybody on here even know what that is. Debt ceiling related. Surely that’s the next big uncertainty in this whole debacle?

Charles Stanhope
CS
Charles Stanhope
1 year ago
Reply to  B Emery

Welcome back Ms Emery.
As with EB, an attack of CMF perhaps?

B Emery
BE
B Emery
1 year ago

Thank you Mr Stanhope, well I seem to cause a stir quite often quite by accident, thought I’d give it a rest for a few days. It’s good to take a break sometimes.

Last edited 1 year ago by B Emery
B Emery
B Emery
1 year ago

Thank you Mr Stanhope, well I seem to cause a stir quite often quite by accident, thought I’d give it a rest for a few days. It’s good to take a break sometimes.

Last edited 1 year ago by B Emery
Charles Stanhope
Charles Stanhope
1 year ago
Reply to  B Emery

Welcome back Ms Emery.
As with EB, an attack of CMF perhaps?

B Emery
B Emery
1 year ago

Are we allowed to talk about the x date yet. Does anybody on here even know what that is. Debt ceiling related. Surely that’s the next big uncertainty in this whole debacle?

Peter Mott
PM
Peter Mott
1 year ago

❝the US would stop at nothing to punish countries that stepped out of line or defied Western diktats❞ Brave Russians defying US “diktats” by invading Ukraine! The phrase betrays the emotional engine driving Fazi’s piece. For the economics its better to follow the link he gives to Michael Pettis: https://www.elgaronline.com/view/journals/roke/10/4/article-p499.xml

zee upītis
zee upītis
1 year ago
Reply to  Peter Mott

Exactly. And “it could happen to anyone” — I don’t think most of the countries plan to invade their neighbours so that this would make them jumpy. Putin intentionally cut off all the ties to the West and that’s part of his game to make it look like the West did it. Happy for yuan tho.

zee upītis
zee upītis
1 year ago
Reply to  Peter Mott

Exactly. And “it could happen to anyone” — I don’t think most of the countries plan to invade their neighbours so that this would make them jumpy. Putin intentionally cut off all the ties to the West and that’s part of his game to make it look like the West did it. Happy for yuan tho.

Peter Mott
PM
Peter Mott
1 year ago

❝the US would stop at nothing to punish countries that stepped out of line or defied Western diktats❞ Brave Russians defying US “diktats” by invading Ukraine! The phrase betrays the emotional engine driving Fazi’s piece. For the economics its better to follow the link he gives to Michael Pettis: https://www.elgaronline.com/view/journals/roke/10/4/article-p499.xml

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

I fink vis iz a lode of tosh ritten bi sumwin wi viz levl iv ekernommik lytrucy

Chris Wheatley
Chris Wheatley
1 year ago

Ze ony problam wit Ekernomix is Ekonomistes.

Chris Wheatley
CW
Chris Wheatley
1 year ago

Ze ony problam wit Ekernomix is Ekonomistes.

Nicky Samengo-Turner
Nicky Samengo-Turner
1 year ago

I fink vis iz a lode of tosh ritten bi sumwin wi viz levl iv ekernommik lytrucy

Paul T
Paul T
1 year ago

China holds an enormous Value of U.S. bonds; de-dollarisation is a leftie fever-dream they have been stiffing on forever.

Paul T
Paul T
1 year ago

China holds an enormous Value of U.S. bonds; de-dollarisation is a leftie fever-dream they have been stiffing on forever.

Tony Kilmister
TK
Tony Kilmister
11 months ago

Yeah of course. Those across the globe looking for a new safe and reliable place to entrust their funds will be heading to Beijing. FFS.

Last edited 11 months ago by Tony Kilmister
Tony Kilmister
Tony Kilmister
11 months ago

Yeah of course. Those across the globe looking for a new safe and reliable place to entrust their funds will be heading to Beijing. FFS.

Last edited 11 months ago by Tony Kilmister