Is The U.S. Trying To Destroy The Dollar?

The U.S./ IMF just demonstrated to the entire world that it has the willingness and power to smash the ability of a world superpower to do anything useful with its foreign reserves. They can all be made worthless based on a political decision. The decision to cut offthe Russian central bank’s access to $630 billion of foreign reserves has truly shaken the globe. Most of that is held in Special Drawing Rights, a unit of account maintained by the IMF as a claim on hard currencies, which means mostly dollars. Jeffrey Tucker says that a sudden decision to disable that access tremendously devalues the dollar as a store of value for central banks around the world. The implications could be devastating for the dollar as the de facto worldreserve currency.

- Jeffrey Tucker

A good rule in evaluating American foreign policy: Nothing is as it seems. Everyone I know is playing the signaling game with regard to the Russia/Ukraine war. Who is the bad guy, and who is the good guy? Every American pundit seems to know with absolute certainty, all of which recalls the great insight of H.L. Mencken that we seem culturally incapable of comprehending complexity when it comes to any subject of foreign relations.

What’s remarkable here is how the populist pressure seems now to prevail over diplomatic wisdom. We saw that last week with the tremendous push to punish Russia through financial exclusion.

Who was harmed by this most? Look at the lines of citizens in the streets of Moscow, desperately trying to get their cash out of banks. Look at the value of the ruble. Look at the Russian stock market.

Playing With Fire

A few commentators mentioned that harming Russian citizens themselves is a great tactic because then the citizenry will turn on Vladimir Putin and pressure him to reform or resign. This opinion is unbearably naive. The last time I heard this was over U.S. intervention in Iraq: The claim was that attacking Iraq would lead to the overthrow of Saddam Hussein. Obviously, that didn’t happen.

The U.S. eventually just killed the guy. Is this where the U.S. and NATO are now with Putin? Not likely. With regard to Putin, not even the U.S. is this reckless. In which case, one wonders why this is happening. What accounts for this wild rhetoric?

It’s a display of appalling amateurism that would have been unthinkable a few decades ago. The people in charge today are silly people, without experience. That leads to massive mistakes.