Valéry Giscard d’Estaing served as France’s President from 1974 to 1981.
In the years leading up to his Presidency, Giscard served as Minister of the Economy.
It was then that he coined the term “exorbitant privilege”.
What was Giscard talking about?
He was talking about the U.S.’s role as the world’s reserve currency.
He worried that the people of France would “see themselves supporting American living standards and subsidizing American multinationals”.
Which is exactly what happened.
As another American economist put it: “It costs only a few cents for the Bureau of Engraving and Printing to produce a $100 bill, but other countries had to pony up $100 of actual goods in order to obtain one.”
I wonder if Giscard could see the future. And how having the privilege of holding the world’s reserve currency could be weaponized by the U.S. Especially when combined with data from the Swift network.
As you may know, Swift is a messaging network that enables most of the world’s cross-border funds transactions.
Swift gives the US power to see who’s sending money where. And if the U.S. doesn’t like where the money is flowing … it can simply put sanctions against the offending party.
For instance, the U.S. can impose sanctions that remove other countries’ ability to send money cross-border. Which limits their ability to import and export goods.
So, having the reserve currency along with Swift data is how the U.S. gets other countries and foreign nationals to bend to its will.
Now, I’m not saying any of this is bad – necessarily. I’m an American. And as such, I’ve enjoyed the privilege of being on the right side of the weaponized dollar.
But, like many things in the world, things are changing fast.
China is rapidly rolling out and marketing its digital Yuan.
Russia is said to be launching a digital Ruble.
And when these countries have widely accepted digital currencies …
They won’t need the US dollar. And they won’t need Swift.
Which means U.S. sanctions against those countries will be ineffective.
What we are really witnessing here is the death of the U.S. dollar. It’s a slow death, to be sure. But the dollar is in its final days.
China has committed to having its digital currency in full use by the 2022 Olympics.
And if I’m right, that’s when our dollar will become worthless.