Banananomics: How The US Dollar Is Losing Its Global Status

BRICS is advancing to eliminate the US dollar (USD) in all its global trade and transactions in 2024, while companies under sanctions are considering Bitcoin.

Inputs that matter: According to the Council on Foreign Relations, "In countries with historically weak currencies, including several Latin American and African countries, bitcoin has become popular with populist leaders."

• The U.S. Dollar is losing its grip on global economic activity. Argentina is the latest country to move to Bitcoin (BTC) in favor of the USD.

• President Bukele made headlines in September 2021 when he declared BTC a legal currency for El Salvador.

• "The primacy of the U.S. dollar has provided the United States unrivaled power to impose crippling economic sanctions—which states including Iran, North Korea, and Russia are increasingly using cryptocurrency to evade."

The opportunity: Matthew Ferranti, a fifth-year PhD candidate in Harvard's economics department, argues that many central banks should hold a small amount of Bitcoin under normal circumstances and much more if they face sanctions risks.

• Luzius Meisser, chairman of the crypto financial services provider Bitcoin Suisse, explains, "One of the interests of Switzerland and the Swiss people is to have a safe and stable currency. I firmly believe that it would strengthen the Swiss franc and the independence of the Swiss National Bank if we spent less on loss-making government bonds and started HODLing Bitcoin."

• Chairman Thomas Jordan said the Swiss National Bank remains skeptical about buying bitcoins despite campaigners' calls to change Swiss law and allow cryptocurrencies to be added to its currency reserves.

• "Currency reserves are international payments. They have to be liquid. They have to be sustainable. And we have to be able to sell and buy them."

Zoom in: In an effort to move away from the G7's use of the U.S. Dollar (USD), competing BRICS members China and Russia recently signed a trade agreement allowing them to use local currencies to settle commodities trades.

• Today, more than 90% of the nation's bilateral trade dealings are settled in the yuan or ruble.

• Meanwhile, in Venezuela, Tether, a cryptocurrency pegged to the USD, is used for oil export transactions to avoid having revenues frozen in foreign bank accounts.

Between the lines: "We will continue to deploy our sanctions authority to counter Iran with further actions in the days and weeks ahead," U.S. Treasury Secretary Janet Yellen stated.

• Despite sanctions, crude oil exports from Iran hit the highest level in six years, with almost all 1.56 million barrels going to China, earning Tehran $35 billion.

• "The Iranians have mastered the art of sanctions circumvention," Fernando Ferreira, head of geopolitical risk service at Rapidan Energy Group, told the FT. "If the Biden administration is going to have an impact, it has to shift the focus to China."

Follow the money: Since 1971, the U.S. Dollar has been the world reserve currency and the primary means of payment for oil exports.

• BRICS was designed to combine the developing countries in opposition to the Western European and North American nations.

• The BBC reports, "Egypt, Ethiopia, Iran, Saudi Arabia, and the United Arab Emirates (UAE) were invited to become members, effective 1 January 2024."

• Until recently, all of the BRICS members settled oil sales in U.S. Dollars.

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