Rickards: We’re Our Own Worst Enemy

Weaponizing the dollar has been a disastrous mistake. From James Rickards at dailyreckoning.com:

Rickards: We’re Our Own Worst Enemy

It’s a fact of life that in any group of students, some are likely to be smarter and quicker than others while some just can’t keep up.

It’s unfortunate that Treasury Secretary Janet Yellen has turned out to be the slow kid in the class when it comes to economic sanctions and financial warfare.

Almost 10 years ago, I sat in a secure conference room at the Pentagon and explained to a group of U.S. national security officials from the military, CIA, Treasury and other agencies that the overuse of the U.S. dollar in financial warfare would eventually drive countries away from using dollars in international transactions for fear that they could become the next target of U.S. displeasure.

Some took note, some ignored the warning and one Treasury official slammed the table and said, “The dollar has been the global reserve currency, it is the global reserve currency now and it always will be the global reserve currency!”

I told him I felt like I was in Whitehall in London in 1913 listening to John Bull say the same thing about sterling. Sterling would begin to be pushed aside by the dollar just one year later with the start of World War I.

We’re Our Own Worst Enemy

More recently, I taught a seminar at the U.S. Army War College on financial warfare in which I explained that U.S. financial sanctions would not have a material impact on Russia, that Russia would not change its behavior in Ukraine based on the sanctions and that the U.S. would suffer more from its own sanctions than Russia because adversaries and neutral countries would create alternative payment platforms that did not use dollars.

I encountered skepticism from the class (that’s OK; the purpose of a seminar is to engender competing views).

I’ve said to the military and intelligence community, “I don’t think other countries can destroy the dollar, but we can do it ourselves. We are our own worst enemy.”

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