❝ Painful sanctions on Iran have demonstrated the long reach of the U.S. Treasury, forcing much of the globe to fall in line and cut oil imports from Iran despite widespread disagreement over the policy. Yet, we are only in the first few chapters of what may ultimately be a long story that ends with the erosion of the power of the U.S. dollar.
The role of the greenback in the international financial system is the reason why the U.S. can prevent much of the world from buying oil from Iran. Oil is traded in dollars, and so much of international commerce is based in dollars. In fact, as much as 88 percent of all foreign exchange trades involve the greenback…
❝ The president of the European Commission, Jean-Claude Juncker, said a few days ago in a speech that the euro should be elevated as a reserve currency in order to break European dependence on the U.S. dollar. Juncker noted that the EU paid for 80 percent of its energy imports in dollars even though only 2 percent of imports come from the U.S. “There’s no logic at all in paying energy imports in dollar not euro…”
Nothing new about imperial powers requiring their currency’s primacy. Take it all the way back to the Roman Empire. Now, folks are not only acting to upgrade two existing reserve currencies to replace the dollar in transactions involving little or no US presence – the Euro and Japan’s Yen – contractors along the dual routes of the Belt and Road Initiative from China to the Netherlands are beginning to pay their bills in China’s RMB, the Renminbi.
Certainly no tidal wave, the process has been considered inevitable by Foreign Exchange traders for a while. The world’s second largest economy is trading globally in a range of currencies; but, it makes as much sense to both sides of most deals to use the currency native to the vendor in the first place.
The backwards ideology of our fake president provides another small nudge in the direction of expanded currencies, reserve and otherwise.