The dollar is the Gordian knot of geopolitical tensions. The signals pointing in this direction are now legion. Bitcoin is biding its time.
BRICS think about the post-dollar
The Russian representative of the International Monetary Fund Alexey Mozhin said last Friday that BRICS must prepare for a collapse of the international monetary system.
Mr. Mozhin explained that it is possible to create a currency “built on a basket of currencies from the five member countries”. The basket would consist of the Chinese yuan, Indian rupee, Russian ruble, Brazilian real and South African rand.
“Such a proposal is currently under discussion. In the event of a collapse of the dollar and the international monetary system, it will be necessary to transform the said BRICS accounting unit into a real currency.did he declare.
BRICS member countries no longer hide their ambition to abandon the dollar in favor of their national currencies. Russian Deputy Finance Minister Ivan Chebeskov notably declared at the start of the year:
“Most countries [des BRICS] believe that payments in national currencies are necessary. We are already a big family with ten nations. Most support the need to create new payment mechanisms and share their experience in developing central bank digital currencies [CBDC] “.
In other words, the BRICS want to create a system competing with the SWIFT network, which would be based on CBDCs. The Basel Bank for International Settlements is working on this (projects mBridge, Agoraetc).
However, it is difficult to imagine that a bank controlled by the West could oversee this new system. Furthermore, creating a Frankenstein CBDC composed of five other currencies is probably a pipe dream.
Why not simplify your life by simply using bitcoin? It is a currency as well as a payment system, two-in-one, ready to use.
Trump at the bedside of the greenback
Donald Trump is leading a vigorous campaign to warn of dedollarization efforts that are gaining ground within the BRICS.
An article from Bloomberg reveals that the former US president is considering punitive measures to deter recalcitrant countries. The dollar today represents 47% of international transactions (59% if we do not count intra-European transactions in euros).
At the same time, 57% of global foreign exchange reserves are made up of dollars or, more precisely, US Treasury bills (American public debt).
Punitive measures could include export controls and customs duties. They will target both allies and rivals of the United States. The ultimate sanction being the freezing of foreign exchange reserves. Russia paid the price in 2022 with the freezing of 300 billion euros and dollars.
Mr. Trump's priority is to maintain US monetary hegemony. In this regard, Japan has just been called to order by Janet Yellen. The Treasury Secretary said the Japanese central bank should consult her before intervening to support the yen in the foreign exchange market. This warning comes a few days after the BoJ sold Treasury bonds to support the yen which has already lost 50% of its value against the dollar since 2012.
The question is whether the United States can still afford to impose sanctions in all directions? Knowing that after the sanctions comes the costly war… The President of the IMF warns that the current level of the budget deficit is not sustainable.
“Service on the American debt ($34,000 billion) absorbs more than 17% of federal revenues, compared to less than 7% in 2015,” she said this Monday during the annual conference of the Milken Institute.
Even Elon Musk advises tightening your belt rather than bringing out the war drums.
Bitcoin and the end of exorbitant privilege
This privilege comes from the petrodollar system put in place from 1975. It was at this time that Washington put an end to the Gold Standard before forcing OPEC countries to sell their oil exclusively in dollars.
Along the way, the dollar has established itself as the currency of globalization and therefore the reserve currency of central banks. The United States takes advantage of this situation since reserves are systematically invested in US Treasury bonds (to earn interest).
Nearly 57% of reserves are placed in the dollar, more than $7 trillion that artificially supports the value of the dollar. The latter would otherwise be weighed down by the chronically deficit trade balance of the United States (-$773 billion in 2023…).
This is the exorbitant privilege of the United States: being able to import more than it exports without its currency sinking. Donald Trump wants to protect the dollar at all costs because Americans' privileged standard of living depends on it.
Problem is, China continues to get rid of US debt, which could one day result in a breakdown in trade relations. Secretary of State Anthony Blinken recently threatened Beijing to disconnect some Chinese banks from the dollar…
This (inflationary) scenario would signify the end of the international monetary system dominated by the dollar. We will then return to the Gold Standard. Or will we instead embrace bitcoin, which is gold but better?
Let's not forget that almost 94% of bitcoins have already been issued. Half as many bitcoins as gold are already being created compared to the existing stock.
Bitcoin also has the good taste of traveling at the speed of light. Or even cost only a few dozen cents for transactions of any amount.
It has all the assets to become an alternative international reserve currency. Stateless and uncensorable, this cutting-edge currency will allow all nations to trade on equal terms.
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