As the United States continues its economic sanctions around the world, some nations are trying to get rid of the dollar dominance.
The United States has been victorious in the financial war, particularly in terms of sanctions. However, what goes around, comes around.
According to Jim Rickards, for years, Russia and China have been trying to escape the "dollar hegemony" by creating a new financial system independent of the dollar that helps them avoid dollar-based economic sanctions.
Indeed, the Russian government recently reduced its holding in US Treasury securities by 84% to acquire gold. Over the past decade, Russia has tripled its gold reserves to nearly 2,000 tonnes, surpassing China on the list of major gold holders.
In addition, China, Iran and Turkey also want to break away from the US dollar.
Iran's Trump sanctions prevent China from paying Iran in dollars. It is for these reasons that these countries want to get out of the US dollar.
At the same time, Europe remains a loyal partner, fearing reprisals for denying access to payment channels in US dollars.
However, Europe is also showing signs that it wants to escape the hegemony of the dollar. Germany has recently introduced SWIFT (Society for Worldwide Interbank Financial Telecommunication), a new European payment system independent of the US dollar. SWIFT is at the centre of the global financial network and the major banks transfer their main currencies using the SWIFT messaging system.
Iran turned to SWIFT to transfer euros and yen because it was banned from the FedWire payment system (dollar).
European allies are looking for ways to circumvent US sanctions. Europe's solution is therefore to create new non-monetary payment systems such as cryptocurrencies.
The dollar's dominance in global finance could therefore end earlier than expected. We've been approaching it dangerously for some time, according to Jim Rickards.
Posted by : BUNKER GOLD&SILVER
Source: dailyreckoning.com