Trump’s war and global dedollarization

A major bulwark protecting the US economy has been that the dollar is the world’s reserve currency. Now, Trump’s “excursion” (don’t say “war”) is looking to change that.

“A senior Iranian official has told CNN that Tehran is considering allowing a limited number of oil tankers through the Strait of Hormuz — but only if cargo is traded in Chinese yuan, not US dollars. The condition, if formalised, would represent the most significant challenge to the petrodollar system in its fifty-two-year history, striking at the financial architecture that underpins American global power rather than at US military assets.”

*snip*

“What makes the Iranian proposal structurally significant is not simply that it challenges the dollar — de-dollarisation rhetoric has circulated for years without materialising into meaningful change. What is different here is the mechanism. Tehran is not merely proposing that some bilateral trade occur in yuan. It is proposing that access to the world’s most critical energy chokepoint be conditional on currency denomination.

“The practical consequence, if even partially adopted, would be a bifurcated global oil market: yuan-denominated barrels flowing through Hormuz for those willing to pay in China’s currency, dollar-denominated barrels rerouted at significant additional cost and time for those who are not. The war premium that Western energy importers are already absorbing would become structural rather than temporary.”

The reason the US can sustain almost unlimited borrowing is because US treasuries are backed by the dollar. When that goes away, borrowing will be much more expensive. US citizens will have to deal with this either through higher taxes or inflation. Trump is driving us over that cliff. The long-term cost to America would be incalculable.

https://europeanbusinessmagazine.com/business/iran-has-just-fired-the-most-dangerous-shot-of-this-war-and-it-wasnt-a-missile/?utm_source=substack&utm_medium=email 

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