Mon 09 Sep 2024 ▪ 6 min read ▪ by Nicolas T.
The Republican candidate for the US presidency threatens the BRICS with severe economic sanctions if they move away from the dollar. Bitcoin as an alternative solution…
Money or life
Donald Trump is wielding both the carrot and the stick. The carrot came on Friday with the promise of lifting sanctions:
«I have used sanctions myself, but I lifted them as quickly as possible so as not to kill the dollar. […] We have lost Iran, Russia, and China is trying to make its currency the dominant currency. The dollar is losing its dominance.»
In fact, the transaction volume of China’s cross-border payment system CIPS was 123 trillion yuan in 2023 ($17 trillion). This figure is on track to double this year to reach approximately $34 trillion. Compared to the 150 trillion exchanged via the Swift network.
Even the IMF recently noted that the use of the yuan in cross-border payments rose from 0% in 2014 to 20% in 2021 (out of a sample of 125 countries). A quarter of these countries mostly use the yuan to trade with China.
The blow was not long in coming. Donald Trump declared the next day that "the dollar is under siege."
"We must ensure that the dollar remains the international reserve currency. This is what I will say to reluctant countries: if you abandon the dollar, you will no longer trade with the United States. We will impose 100% tariffs on your goods," he said at a rally in the state of Wisconsin.
This is a threat aimed at China and the BRICS in general. That is, the countries that have made de-dollarization a priority since the freezing of Russia's foreign exchange reserves (~300 billion euros).
The dollar has no place in a multipolar world
As Russian Foreign Minister Sergei Lavrov said upon taking over the rotating presidency of the UN Security Council in July:
« Restoring the balance of regional and international powers must be accompanied by eliminating the injustices that lie at the heart of the global economy. There can be no monopoly at the monetary level in a multipolar world. »
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Dollar - Trump threatens BRICS
Mon 09 Sep 2024 ▪ 6 min read ▪ by Nicolas T.
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Investment
The Republican candidate for the US presidency threatens the BRICS with severe economic sanctions if they move away from the dollar. Bitcoin as an alternative solution…
bitcoin
Money or life
Donald Trump is wielding both the carrot and the stick. The carrot came on Friday with the promise of lifting sanctions:
«I have used sanctions myself, but I lifted them as quickly as possible so as not to kill the dollar. […] We have lost Iran, Russia, and China is trying to make its currency the dominant currency. The dollar is losing its dominance.»
In fact, the transaction volume of China’s cross-border payment system CIPS was 123 trillion yuan in 2023 ($17 trillion). This figure is on track to double this year to reach approximately $34 trillion. Compared to the 150 trillion exchanged via the Swift network.
Even the IMF recently noted that the use of the yuan in cross-border payments rose from 0% in 2014 to 20% in 2021 (out of a sample of 125 countries). A quarter of these countries mostly use the yuan to trade with China.
The blow was not long in coming. Donald Trump declared the next day that "the dollar is under siege."
"We must ensure that the dollar remains the international reserve currency. This is what I will say to reluctant countries: if you abandon the dollar, you will no longer trade with the United States. We will impose 100% tariffs on your goods," he said at a rally in the state of Wisconsin.
This is a threat aimed at China and the BRICS in general. That is, the countries that have made de-dollarization a priority since the freezing of Russia's foreign exchange reserves (~300 billion euros).
The dollar has no place in a multipolar world
As Russian Foreign Minister Sergei Lavrov said upon taking over the rotating presidency of the UN Security Council in July:
« Restoring the balance of regional and international powers must be accompanied by eliminating the injustices that lie at the heart of the global economy. There can be no monopoly at the monetary level in a multipolar world. »
The monopoly of the dollar as a global reference currency is what is known as the famous "exorbitant privilege." It is also called the "petrodollar system" because all the petro-monarchies of the Gulf sell their crude oil exclusively in dollars.
Iraq, Libya, Syria and Iran have all rejected the dollar, with the consequences we know… Washington does not hesitate to destroy entire countries to protect its monetary hegemony. In fact, the more the dollar circulates internationally, the more the United States can afford to print to import ever more.
Today, the world has more than $7 trillion in reserves. That's so much money that it's not exchanged for other currencies and that it artificially supports the value of the dollar despite an abysmal trade deficit.
But all good things must come to an end. The nations currently moving away from the dollar are major military powers that are no longer intimidated by American threats. The failure to weaken Vladimir Putin through the war in Ukraine is a demonstration of this.
Hence Donald Trump's threat of an economic war. But once again, is the United States really in a position of strength?
The BRICS Mastodon
The BRICS represent nearly half of the world's population (46%), compared to just under 10% for the G7 (the United States, Canada, Japan, the United Kingdom, Germany, France and Italy).
The BRICS' share of global GDP is now 35% (ppp), compared to 30% for the G7. According to McKinsey, Asia accounts for 50% of global merchandise trade. China is the largest trading partner for more than 120 countries:
Countries whose largest trading partner is China or the USA (2000 vs. 2020) pic.twitter.com/OUelV5XZVN
— Daily Loud (@DailyLoud) November 10, 2022
In other words, it is not certain that the United States is still in a position of strength. Back against the wall, at least 120 countries will probably prefer to maintain their trade relations with China rather than with the United States.
Moreover, let’s not forget that raising tariffs means as much inflation for Americans. El Peterson Institute for Economics has calculated that imposing a global tariff of 20% combined with a 60% tariff on China would cost an average American household more than $2,600 per year.
That’s why Donald Trump doesn’t want the Fed to raise interest rates. He knows that his foreign policy could be extremely inflationary. Good news for Bitcoin, whose fixed, stateless and non-censorable monetary mass makes it a potential international reserve currency.
That’s why Mr. Trump has the idea of creating a strategic reserve of bitcoins before anyone else. The giant asset management company Alliance Bernstein estimates that a victory for Donald Trump in November will propel Bitcoin to $90,000 by the end of the year.
Let’s end by reminding you that Republican Senator Cynthia Lummis has drafted a bill ordering the US Treasury to buy one million bitcoins.
Don’t miss our article: « BRICS – 120 countries ready to dedollarize ».
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