As Russia has just gotten rid of 96% of its dollar foreign exchange reserves, fears that the hegemony of the greenback will wane are growing on Wall Street. A JP Morgan report warns that the Chinese CBDC (Central Bank Digital Currency) threatens the international reserve currency status of the dollar.
The JP Morgan advances without tongue in cheek that “The hegemony of the dollar is due to the fact that it is the currency of trade for raw materials”. Indeed, oil is sold exclusively in dollars, giving the United States “Immense benefits”.
Let’s be specific and name these advantages:
- Exchange paper for oil
- Display a chronically deficit trade balance without depreciating the value of the dollar (thanks to the central banks of the world which place their dollar surplus in the US debt).
In all, the dollar still represents 60% of central bank currency reserves around the world (only 20% for the Euro)… Besides, the authors of the report do not foresee that “the dollar will lose its status as an international reserve currency anytime soon”.
A reasonable forecast as long as the European Union is vassalized … In 2018, Europe settled only 20% of its energy imports in euros and the 80% remaining in dollars. Ubuesque figures when we know that only 2% of our energy imports come from the United States.
Long gone are the days when General de Gaulle sent a warship to New York to exchange his dollars for gold… But when Russia no longer wants to be paid in dollars and only 35% of our energy (oil, gas) comes from the Urals, the situation is likely to change.
On the other hand, another threat is identified in the report: the launch by China of a CBDC …
CBDC vs SWIFT
“No country other than the United States has more to lose in the face of the emergence of CBDCs”
Michael Feroli, Chief Economist of JP Morgan
The statement alludes to China, which is currently testing its CBDC in several cities. JP Morgan is in a bad mood because CBDC would allow China to trade with other countries without going through the SWIFT network.
However, the SWIFT payment system serves as an instrument of domination in the United States since it absolutely infiltrates all international banking transactions in all currencies.
The Americans used it in 2018 – following the breach of the Iranian nuclear agreement – to disconnect Iran from the SWIFT network. Teheran then de facto found himself in physical impossibility of trading with other nations.
To put it another way, this financial arm allows Washington to isolate any country refusing the hegemony of the Dollar. Iran, which refrains from selling its oil in the imperial monkey currency, experiences it bitterly.
Gold, Chinese CBDC would exempt Iran from using the SWIFT network to sell its oil in Yuan. Once the infrastructure is functional, any country will be able to trade with China anonymously, without fear of ending up in a banking embargo.
The New Silk Roads
Beijing has made internationalization of the yuan its geostrategic priority and it is through this prism that we must analyze the pharaonic project of the new silk routes. While the trade war with the United States is likely to develop into a cold war – and therefore a cessation of trade – the middle kingdom must secure new outlets for its production.
To achieve this moult, the Asian dragon knows that it is vital to free itself from Western financial infrastructures. American bankers are worried because the power they derive from the dollar depends largely on the SWIFT network.
Incidentally, the fact that Huawei is not allowed to build infrastructure to distribute internet (5G) is to be compared with efforts to internationalize the Yuan via the CBDC. Indeed, if China manages to bypass the global financial architecture (SWIFT), the West will probably seek to isolate it on the internet. All your cards for submarine cables…
The greatest geopolitical asset of the United States has never been its overwhelming army but its currency and the exorbitant privileges it confers on it. We are witnessing a new cold war against the backdrop of the international monetary system. The only way to reconcile the two superpowers would be for international trade to take place in a stateless currency like Bitcoin. No doubt then that Satoshi Nakamoto will be nominated for the Nobel Peace Prize …
Child of Satoshi, the alchemist who turned a cryptographic algorithm into gold.
I’m talking about monetary geopolitics, not shitcoins.