|Toshio Matsuda, Samurai Lecturer, Commentator & Intl Economist
Straight from the Shoulder
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(This issue is submitted to a Washington D.C., Seattle, and Zurich think-tank as the English edition of “Straight from Shoulder”.)
"Straight from the shoulder " by Toshio Masuda-Samurai Lecturer
Above is on those facts and my imagination
( Free of charge to the people I met)What is the United States’ Achilles Heel?
In the world of capitalism “money talks”.
In the current world of finance, it is the US dollar that talks the loudest.
The United States’ Federal Reserve Bank (FRB) has the power to increase or decrease the US dollar supply.
The US is the only country in the world that has been capitalizing on being the owner of the world’s principal international currency.
As long as the US dollar remains the main international basic currency, the US retains its topmost position of influence over the global economy.
Any weakness of the United States would be wholly attributable to the performance - i.e. the capacity - of its currency.
This capacity is based on the quantity of US dollars used in international transactions.
The following chart illustrates the share of US dollar in foreign reserves held by world’s central banks.
Twenty years ago the reserves of world’s central banks consisted in 80% of UD dollar; now the figure is less than 58%.
China used to be No. 1 holder of the US dollar on its reserve accounts of $1.2 trillion; now this figure has shrunk to around 0.8 trillion.
In 2018 Japan occupied No.2 position with its $1.0 trillion reserves; by 2021 this figure rose to $1.3 trillion, only to shrink below $1.2 in 2023.
Following the invasion of Ukraine, in February 2022, the US-led sanctions imposed on Russia and her trading partners included expulsion from the SWIFT mechanism, forcing them to abandon US dollar in their international trades.
Instead, they had to use their own national currencies or join in the CIPS - (Cross-border Interbank Payment System) that settled accounts through the People’s Bank of China.
The de-dollarization process has subsequently been accelerated by the US sanctions imposed on any country considered to be an enemy, or unfriendly.
Currently the de-dollarisation process can be seen all around.
Anti-American countries, or those unfriendly towards America don’t have to follow Mr Putin, who has been insisting on de-dollarisation.
Following him would move America to retaliate against.
Since 1974 Saudi Arabia and other Middle East oil producers have been accepting only the US dollar in payment for their oils, thus securing the value of petrodollar. In exchange, their securities were guaranteed by the US.
The petrodollar system has underpinned the US dollar’s value ever since.
Then having recognized that the US last troops withdrew from Afghanistan in 2021, MBS (Mohammad bin Salman, the Crown Prince and the Prime Minister of Saudi Arabia) announced that in the near future Saudi Arabia may accept Chinese renminbi in payment for its oil; other oil-producing countries are following.
Sooner or later the petrodollar system will collapse.
If Putin and Xi Jinping wish to stop the US dollar being the world’s principal trading currency, they do not need to put any effort into it.
All they have to do is to sit back and mind their own businesses.
America’s Achilles Heel is nothing more than TIME.
Focus on TIME.
Because “TIME talks!”
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Written by Toshio Masuda