That crash just moved forward at a quickening pace in my opinion. France is pissed off,
...and before you start making jokes about the French, they have the 2nd strongest economy in the EU
The Quickening Demise of the US DollarLost in the tumultuous news cycles of the past few weeks was this shell-shocker: The United States imposed a massive $9 billion fine on BNP Paribas, the largest bank in France, for trading with countries that are under U.S. embargo. In addition to this fine was a penalty of not being able to transact in US Dollars for one year.
The fine is extremely large and reflects the American administration’s anger at France. The French are angry as well. They are unhappy at being under the thumb of American regulators due to their exposure to global transactions in USD.
Why does this demand your attention?First, the fine is against international law because the U.S. is applying its own law extra-territorally. American sanctions are America's affair – at least they’re supposed to be. But lately, the U.S. has been forcing everyone else to play by its rules. In May, the U.S. fined Credit Suisse $2.6 billion for not enforcing U.S. tax laws. Then came the implementation of FATCA on July 1. So the United States wants the international banking community to act not only as its spies, but as its tax enforcement as well.
This entire episode will hasten the decline of the USD as a reserve currency and trading vehicle as nations such as France move away from the dollar to avoid similar incidents in the future.
The French are not known for their adherence to the American view of human rights and the moralistic ideals the U.S. has foisted upon the world over the last fifty or more years.
Washington’s dubious justification for this breach of international law is that the transactions took place in U.S. dollars. Their currency, their business, right? Maybe. But here’s the problem: The international community is quickly figuring out a solution to that little bugaboo.
What happens to that bully down the street when he gets old? Everybody gets old and frail eventually. Even the nasty, sneering lunk who steals everyone’s lunch money realizes one day that he has become a toothless, toddling old fart that no one is afraid of anymore. Everyone stops worrying about him and can go on about their business with one less problem to deal with. But what of the bully? What happens to him?
On the global scene, the United States appears to be that bully. And the bully is indeed getting old and frail. So, now what?
They’re still a bully, to be sure. The fact that they extracted a huge fine from BNP Paribas, a foreign-owned bank, for violating U.S. sanctions against Iran, Cuba and Russia that they never had a say in… well, that’s a bully for you. They throw their weight around, say who you can and can’t talk to, say who you can and can’t sit with at the lunch table, and if they catch you doing it, they chase you down, give you a wedgie, dangle spit over your face and steal your lunch money. And you pay it. Grudgingly. Because you are small. But you go home and immediately plot ways to get around the neighbourhood bully. You might take karate classes. You might work to get bigger and stronger so you can fight back. You might band with other victims to find strength in numbers. You might find alternate routes to and from school. But one thing is for certain. You won’t put up with it forever.
And that’s what’s happening around the world.The French Finance Minister, in early July, called for a ‘rebalancing’ of currencies used in world trade–and a lessening of the importance of the USD in international finance.
Suddenly other countries are talking to one another. They’re banding together and figuring out how to get strong enough to fight back against the U.S. Just this week, Belgium sat down with BNP to see “what could be learned” from this judgment. Officials from the European Central Bank are not even being coy about what lessons they are learning: Diversify out of the dollar, ASAP. Christian Noyer, governor of the French National Bank and member of the ECB’s governing board, recently said this in an interview:
“Beyond [the BNP] case, increased legal risks from the application of U.S. rules to all dollar transactions around the world will encourage a diversification from the dollar. BNP Paribas was the occasion for many observers to remember that there has been a number of sanctions and that there would certainly be others in the future. A movement to diversify the currencies used in international trade is inevitable. Trade between Europe and China does not need to use the dollar and may be read and fully paid in euros or renminbi. Walking towards a multipolar world is the natural monetary policy, since there are several major economic and monetarily powerful ensembles. China has decided to develop the renminbi as a settlement currency. The Bank of France was behind the popular ECB-PBOC swap and we have just concluded a memorandum on the creation of a system of offshore renminbi clearing in Paris…”
This is a shot across the bow of the U.S. by a close ally and is in concert with efforts by Russia and the other BRICS countries to reduce their dependence on the American currency. This will lead to a loss of financial power by the United States and, over time, will harm the American economy.
It isn’t just France that the U.S. has been targeting. A recent article noted that many other foreign entities are in the U.S. government’s crosshairs: “Lately, the U.S. has been forcing everyone else to play by its rules.
The United States needs to understand that other sovereign countries don’t like to have their behavior dictated to them by the lone superpower in the room, even if they are allies and rely on American defense protection.
This conflict among friends highlights a broad shift in global finance and geopolitical realities. America is becoming weaker by the day financially as they spend money they don’t have and print money as fast as they can like a third world banana republic... this behavior will have consequences.
We are seeing these effects as the world shifts away from USD hegemony. Countries want to hold their assets in a currency that will hold its value. That is not happening with the USD. The Chinese Yuan is rapidly emerging as a counter reserve currency and trading vehicle.
This shift is only hastened and reinforced by American heavy-handed actions in dictating terms to others that trade in dollars. The problem was recently summed up rather eloquently with the statement:
“The United States is bullying itself right out of reserve currency status.
Just as with FATCA, the U.S. is snooping where it has no right to snoop. But the more they do this, the more they bully others, the sooner other nations will find a way around the bully. And then where will that leave the U.S.? Where will that leave the dollar? Where will that leave YOUR savings, YOUR retirement, or any of those assets you own that are denominated in dollars? Where will that leave any of us?”
So there you have it: The United States is bullying itself right out of reserve currency status. And for what? As some façade of a moral crusade against the nations they have under embargo?
The U.S. government appears to be painting everyone into a corner. If you haven’t already protected your portfolio with precious metals, we urge you to get started today.
The bottom line is that people need to make sure their portfolios are hedged against a long-term decline in the value of the American dollar and the loss of the bid the currency has enjoyed since the Bretton Woods agreement at the end of World War II. The world is changing, and these paradigm shifts will have real negative effects on the U.S. economy, American wealth, and anything tied to paper currencies. America's lack of fiscal responsibility is only hastening this reality.
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