Killing your own reserve currency is monumental folly. From Peter Reagan at theburningplatform.com:
President Biden’s decision to participate in the Ukraine-Russia conflict back in February 2022 has taken a new and dangerous turn this year.
The U.S. dollar could suffer dramatically as a result.
Before we explore that new development, we’re going to start by quickly summarizing some of the events that led the United States to this point.
Let’s begin…
In the February 28th, 2022 issue of Matt Levine’s Money Stuff column for Bloomberg, Levine wrote about the sanctions placed on Russia:
the U.S., the European Union, the U.K., Switzerland, Singapore and other countries announced harsh sanctions against Russia for its unprovoked invasion of Ukraine. There are a lot of these sanctions – banning Russian flights through European airspace, limiting Russian banks’ access to the SWIFT interbank messaging system, etc. – but the most drastic might be U.S., U.K. and EU bans on any transactions with the Russian central bank. The bulk of Russia’s foreign reserves are held in the form of securities, deposits at other central banks and deposits at foreign commercial banks. A ban on transactions with Russia’s central bank means that it can’t sell those securities or access those deposits. Its foreign currency reserves turned out to be mostly useless.
As is the case with most geopolitical conflicts, there is always a lot more to the story than gets reported in the mainstream media (Russian, U.S., or otherwise). For example, some of the history behind the current conflict actually dates back to 2014.
Nonetheless, the bottom line is that the financial sanctions placed on Russia in 2022 were supposed to have a severe impact on Russia’s economy.
Unfortunately, for President Biden and NATO allies…
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