Last week French Finance Minister Michel Sapin spoke out against the United States’ dollar’s standing as the world’s reserve currency. Upset with a $9 billion fine leveled by the U.S. against French bank BNP Paribas for helping nations like Sudan and Cuba avoid U.S. sanctions, Sapin called for a “rebalancing” of currencies used to make global payments. Translation: The dollar has to go.
The Financial Times reported that it’s been nearly 50 years since Valéry Giscard d’Estaing, then France’s finance minister, spoke out against the dollar’s position as the reserve currency, calling it an “exorbitant privilege.” Since then, the dollar has been attacked and besmirched time and time again. As John Connally, treasury secretary for Richard Nixon, once said about the dollar, it is “our currency, but your problem.” Indeed, the world is getting sick of the problem.
No one can doubt the U.S. dollar’s dominance in the world today. After Sapin’s comments, financial writers quickly pointed out that no currencies currently exist that can compete with the dollar. Thus they have no choice but to continue to use the dollar to finance international transactions. “They may not like it,” the Financial Times reported, “but it is not clear what France and other critics can do to alter the status quo.”
As U.S. foreign policy continues to alienate its allies, nations beginning to establish regional alliances to protect themselves. This applies not only militarily, but also financially. One of the most recent regional economic alliances is between Brazil, Russia, India, China and South Africa (BRICS). Investment group Goldman Sachs speculated back in 2003 that by 2050, these five nations would be wealthier than most of the current major economic powers.
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