As Congress and the Trump administration announce sanctions and tariffs on just about every country in the world (an agenda I support, by the way, to restore our industry base and national security), it should be noted that this will be the last time the U.S. can use its hegemony over global financial markets to achieve foreign policy goals.
The world will simply not allow the United States to have domination over its economic future any longer after the Trump presidency. Other countries will find a way around the dollarization of the global economy, a system set up after the end of World War II with the Bretton Woods agreement, ironically to prevent conflict started by financial pressures between nations.
I think President Trump knows this.
This is why he is going all in with this weapon while America still has it, wielding it against Iran, North Korea, China, the EU, and Russia.
The sanctions against Russia announced Thursday will have serious consequences if fully implemented. Russian financial indexes nose-dived, an acknowledgment by the markets of this reality. The sanctions against Iran are devastating and haven’t even been fully implemented. The EU will also feel the pain of these measures, as Mr. Trump attempts to forge a new and improved Iran deal and stop the murderous mullahs from getting the bomb, a development that we simply cannot allow to happen.
Russia, China, Iran, the Swiss and others have long been trying to undercut the power of the U.S. dollar. Russia just recently sold most of its stockpile of U.S. Treasury debt to avoid any pain incurred by future sanctions from Washington.
China and Russia are actively working to remove the dollar from commodity trades, along with other bilateral transactions. Iran is keen to do the same. The “petrodollar” and the need to trade commodities only in dollars will also go by the wayside in the near future.
Look for the use of cryptocurrencies and blockchain technology to explode, as nations and corporations look to get out from under Washington’s thumb. Having an untraceable, relatively safe, and opaque option for financial transactions is extremely attractive to rogue governments, and may be attractive to some or our allies as well. Reserve currency status doesn’t last — just ask the Romans, the Dutch, the Spanish and the British.
The hammer of the almighty greenback is something large parts of the world will simply not accept going forward; the risks are simply too great. Mr. Trump has a small window to use the big stick effectively to rewrite globalist trade deals that were destroying the American economy, and demand better behavior, better trade agreements and better arms deals from our adversaries and competitors.
I’m glad he’s using it, but America must prepare a different future not too far down the road.
We must be prepared for the eventual decline in the power of the dollar, and the advantages it gives American policymakers. We can prop up the dollar’s value by having the world’s strongest and resilient economy, but forcing other countries to use a currency where they incur substantial loss of financial sovereignty soon will no longer be an option. Perhaps Mr. Trump could even think about making America great again by returning to the gold standard to ameliorate any future devaluations.
Losing the power we’ve enjoyed since the days of Bretton Woods will be an adjustment, but one we need to make.
America can compete with anyone, even without controlling the world’s reserve currency. Being forced to compete will be a good thing over the long term for the country, and improve the prospects for our children.
⦁ L. Todd Wood is a former special operations helicopter pilot and Wall Street debt trader, and has contributed to Fox Business, The Moscow Times, National Review, the New York Post and many other publications. He can be reached through his website, LToddWood.com.