CNN and Fox Question the Dollar
Following a meeting between Xi and Putin, CNN and Fox News both put out segments questioning the strength of the dollar as the world’s reserve currency. The news is quickly going mainstream. In a quote popularly attributed to Mark Twain, when asked how he went bankrupt, he responded, “Slowly and then all at once.”
On March 22, 2023, Russian President Vladimir Putin and General Secretary of the Chinese Communist Party Xi Jinping concluded a conference on peace in Ukraine and settling trade in a currrncy other than the dollar.
Per Al Jazeera,[1]
President Xi Jinping and his Russian counterpart Vladimir Putin were filmed saying warm goodbyes as their two-day meeting ended with China’s leader saying they were driving geopolitical change around the world.
[…]
A video of Xi’s departure on Wednesday was filmed with translators speaking for both men.
‘Right now there are changes – the likes of which we haven’t seen for 100 years – and we are the ones driving these changes together,’ Xi told Putin as he stood at the door of the Kremlin to bid him farewell.
The Russian president responded: ‘I agree.’”
Roughly 100 years ago in 1944 (79 years ago), the soon-to-be victors of the Second World War met in Bretton Woods, New Hampshire. They agreed to make the dollar the world’s reserve currency backed by gold because the other industrial nations had either been conquered (Germany and Japan), liberated (France), devastated (Soviet Union), or were on the brink of decline (Great Britain). Additionally, the empires of Western Europe had sent much of their gold to the USA to buy war materials during both World Wars and to escape the threat of confiscation from invasion by the National Socialist German Workers’ Party during WWII (1939-45); and, after WWII, the threat of invasion from the Union of Soviet Socialist Republics during the Cold War (1945-1991).[2]
Noting Xi’s comment, on Sunday March 26, 2023, Fareed Zaharia said on his CNN news program, Fareed Zaharia GPS,[3]
“First, here’s my take: The most interesting outcome of the three day summit between Vladimir Putin and Xi Jinping got limited media attention. Describing their talks, Putin said, ‘We are in favor of using the Chinese yuan for settlements between Russia and the countries of Asia, Africa, and Latin America.’
So, the world’s second largest economy and its largest energy exporter are together actively trying to dent the dollar’s dominance as the anchor of the international financial system. Will they succeed? The dollar is America’s last surviving superpower. It gives Washington unrivaled economic and political muscle. It can slap sanctions on countries unilaterally, which freeze that country out of large parts of the world’s economy. And Washington can spend freely, certain that its debt will be bought up by the rest of the world.
The war against Ukraine combined with Washington’s increasingly confrontational approach to China have created a perfect storm which both Russia and China are accelerating efforts to diversity away from the dollar. Their central banks are keeping less of their reserves in dollars and most trade between them is being settled in the yuan. They are also making efforts to getting other countries to follow suit.”
In 1971, the USA defaulted on gold payments after printing more money than there was gold backing it. The Replacement was the Petro-Dollar (1974) in which OPEC, led by Saudi Arabia, exclusively accepted dollars for oil in exchange for US military support. Since the victors of WWII were all in the same boat, they agreed to go along with the scheme rather than just take the loss on their dollar bills. This is the foundation of modern US foreign policy in the Middle East.[4]
That foundation may be eroding, as indicated by Saudi Arabia and Iran agreeing to normalize relations in talks mediated by China starting on March 6. The Saudis have traditionally allied with the USA against Shia countries, such as Iraq and Iran. If peace breaks out, Saudi Arabia won’t need the USA to defend them.
Per Maria Fantappie and Vali Nasr writing for Foreign Affairs in an article entitled, A New Order in the Middle East?, published on March 22,[5]
“On March 6, 2023, representatives from Iran and Saudi Arabia met in Beijing for discussions brokered by China. Four days later, Riyadh and Tehran announced that they had decided to normalize relations. This landmark agreement has the potential to transform the Middle East by realigning its major powers, replacing the current Arab-Iranian divide with a complex web of relationships, and weaving the region into China’s global ambitions. For Beijing, the announcement was a great leap forward in its rivalry with Washington.”
Will Cain said on Fox and Friends Weekend on March 25, 2023,[6]
“Vladimir Putin announced this week that Russia would begin using the Chinese yuan for international payments instead of the dollar. Saudi Arabia is also in talks with Beijing to do the same thing.
Speaking of Saudi Arabia, meanwhile, they’re in talks with Iran to consider an economic alliance with China and Russia and they can even be joining the BRICS Countries, which is an acronym for these countries here: Brazil, Russia, India, China, and South Africa. These countries all have emerging economies. So, what happens if our economy and the US dollar are no longer the world’s dominant currency?”
What happens is that we can’t print money to buy imports. People will want us to pay more money, use another currency, or export goods and services. We’ll have to consume only as much as we produce- and less than that if we wish to save for the future. The gap between what we can afford and our debt is an entirely different lifestyle for most Americans.
Following a meeting between Xi and Putin, CNN and Fox News both put out segments questioning the strength of the dollar as the world’s reserve currency. The news is quickly going mainstream. In a quote popularly attributed to Mark Twain, when asked how he went bankrupt, he responded, “Slowly and then all at once.”
[1]https://www.aljazeera.com/news/2023/3/22/xi-tells-putin-of-changes-not-seen-for-100
[2]https://www.hamiltonmobley.com/blog/r9tu385c22azkxuycdia7o3kludljh
[3]https://www.youtube.com/watch?v=aeio9be2pw8
[4]https://www.hamiltonmobley.com/blog/august-15-1971
[5]https://www.foreignaffairs.com/china/iran-saudi-arabia-middle-east-relations