Will the Reign of the Dollar Come to an End?

It’s about much more than central bank reserves. It’s a about controlling the global financial system. It’s what trade is denominated in, what foreign loans for many countries are denomined in. Why is it good for the United States? The obvious reason is that it allows us to borrow cheaper than we would otherwise, probably half a percent to a percent. And when I say cheaper, it’s everything. Mortgage loans, car loans across the board because the dollar is very liquid. There are deep markets in it. People wanna hold it and it makes it cheaper. And by the way, when you move towards a tri-polar system, let’s say the Euro and the renimbi, taking up some of the dollar’s market share, that’s gonna bring that interest rate we pay up. But there are many other things.

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But there’s something much deeper than that that I people are less aware of. Because the dollar is so central to everything. Many, many financial transactions which happen in far-flung places end up circulating through the United States before they clear. So when you see a modern spy, CIA, and when you say the US always have this ridiculously good information about everything, a part of that is our financial data. Of course the Chinese hate it, the Russians hate it. The Iranians hate it but believe me, the Europeans hate it They would like their privacy. They don’t really want Donald Trump to see as much as he can. I guess one other thing I should have said, it maybe is a corollary of being able to borrow cheaper. When there’s a crisis, the pandemic, financial crisis, the US can go really big in a way other countries are reluctant because they’re afraid their interest rates will move up and make it painful. That does happen to the United States, but it’s more gentle. So after the financial crisis, there were many complaints the US should have stimulated more and I think probably they should, but it did much more than most other countries. And in the pandemic, it was doing double what other countries were doing. And that’s part of the privilege. Now, why does that matter to an ordinary person? It matters because believe me, next time there’s a crisis, you will feel it that the government can’t do as much. You will feel the pain, just as other countries have to do.