This may make US borrowing much, much more expensive


Until very recently, the US dollar has been the only reserve currency trusted by most of the rest of the world.  That’s helped us sell US treasury bonds to other nations, and to investors, because the dollar’s status has been a guarantee of its ongoing security and trustworthiness.

However, the Federal Reserve’s incontinent printing of more and more and more dollars has greatly weakened our currency, just as large parts of the world are rejecting any US economic (or other) hegemony.  It now appears that Russia and China, along with other BRICS nations, are working towards an alternative reserve currency to challenge the US dollar’s dominance.

It shouldn’t be any surprise to those paying attention that Russia and China are strengthening their economic ties amidst continued Western sanctions on Russia as a result of the country’s war in Ukraine.

What may surprise some people, however, is that Russia and the BRICS countries, including Brazil, Russia, India, China, and South Africa, are officially working on their own “new global reserve currency,” RT reported in late June. Nobody even seemed to notice.

. . .

And of course, as Russia has been cut off from the SWIFT system, it is also pairing with China and the BRIC nations to develop “reliable alternative mechanisms for international payments” in order to “cut reliance on the Western financial system.”

In the meantime, Russia is also taking other steps to strengthen the alliance between BRIC nations, including re-routing trade to China and India … In fact, “trade between Russia and the BRICS countries increased by 38% and reached $45 billion in the first three months of the year” this year, the report says. Meanwhile, Russian crude sales to China have hit record numbers during Spring of this year, edging out Saudi Arabia as China’s primary oil supplier.

“Together with BRICS partners, we are developing reliable alternative mechanisms for international settlements,” Putin said.

. . .

I’m … stunned that nobody seems to care that arguably the largest shift on the global macroeconomic playing field over the last half century may be taking place.

Sure, under the context of the conflict in Ukraine, the news may seem “par for the course” of sorts, which may result in the media and the financial world downplaying it. But put this piece of information out there on its own, without context – that there is a coordinated global challenge taking place to the U.S. dollar – and it would be the biggest news story in decades. Imagine if China and Russia just dropped this out of nowhere? Now, remember that both countries have been working on, and preparing for, this situation for years.

. . .

Ergo, it seems to me that the BRIC nations understand exactly how precarious of a financial situation the U.S. – and our dollar – is in. Despite the dollar’s recent strengthening, these nations have been in the midst of a multi-decade-long plan to de-dollarize. Even before the Ukraine conflict started, both China and Russia were stockpiling gold and working on denominating transactions outside of the U.S. dollar. It was another “secret” that was out there in the open.

There’s more at the link.

If the US dollar is no longer the primary reserve currency of the world, and other countries have greater choice in what currencies to hold, then the sale of US treasury bonds (which funds US deficit spending) is about to become much more difficult.  That’s because the USA will have to offer higher interest rates on those bonds to attract investors;  and as the dollar weakens, those investors are going to become more and more skeptical about its value, so they’ll want even more interest.  That, in turn, will absorb more of the US annual budget, soaking up money that might otherwise be used for defense, public services, and entitlement programs.

It’s a vicious circle, and one we aren’t well equipped to break in the foreseeable future.  What’s more, Russia and China will doubtless do everything in their power to make it more vicious.  Russia wants to punish us for our interference with its war in Ukraine, and China wants to keep us so preoccupied with domestic and economic matters that it has a free hand in south-east Asia – particularly in Taiwan.  If currency manipulation and economic measures can accomplish both those objectives, why shouldn’t they pursue them?  They know the Biden administration is effectively hamstrung, unable to respond effectively.

If I were living in Taiwan, I’d get the hell out of there as fast as I could.  I reckon China is very likely to move against it within a matter of a few months at most, while the USA is distracted and ineffective.  It may not even take that long.



  1. The only thing protecting Taiwan is TSMC and the other chipmakers. If China were to attempt a forceful repatriation right now, all Taiwan has to do is open the doors and let the outside air contaminate the chip factories, and they are down for months or years. China needs those plants as much as the rest of the world.

    However, this is becoming a self-resolving issue. TSMC is getting pressured to build plants in the US and off Taiwan, and Samsung and Intel are trying to catch up. If there is enough chip fab capacity outside Taiwan, then China will happily say "go for it".

    Also, all bets are off if Japan and Taiwan figure out that the US can't protect them from China and decide they'd rather join them.

  2. The currency offered by Russia, China, et. al. will have to be (or at least appear to be) as secure as the dollar. But as we keep lowering that bar, that becomes more and more achievable.

  3. Why would you flee Taiwan?

    When the PRC takes over there will be guaranteed zero Drag Queen Story Hour, zero Critical Race Theory, zero Ford Foundation, and less corruption. Also less supply chain disruption and general civilizational collapse than in the USA and Rest of the West. The Chinese are on the upward trajectory for beyond the terms of the lives of everyone reading here and their children… and possibly their grandchildren. History is cyclical of course, but we must be pragmatic.

    Lovely little island. Lovely people. Unlike most BoomerCons, I've actually spent a lot of time there and in the PRC. They need to cut a deal. While they still can. American encouragement to stick it out is evil because will result in unnecessary bloodshed in the name of 'Freedoms' which no American today possesses any more.

    I'd rate them (TW'ers) above Bismarck's Pomeranian Grenadier… But TW is not worth the Bones of a single Flyover American (whom I'd rate last until they wise the #@$% up and overthrow their overlords).

  4. Problem is when TSMC sets up in the USA it has to hire actual Americans. Including for coercive legal reasons plenty of low IQ untalented mystery meats.

    The secret sauce of TSMC is a cadre of extremely high IQ Chinese out of NTU and other elite selective universities in Taiwan who came up through the 80s and 90s during a boom economy with a boom in many necessary ancillary industries. The secret sauce is the people and the institutional knowledge required to coax economic yields out of fabs at the cutting edge.

    30 years of dumbing down… going to be hard to do this anywhere in the USA and pull it off and then keep it going. Intel @#$%ed the pooch with their US fabs by letting Indians get in on the act. Still… I guess NVIDIA and AMD have managed to thrive in the US whilst their TW bosses run very tight ships and keep the HR departments, Kosher Nostra Bankers, and racial grifters under control. But tough. Very tough. At some point even TSMC will decide to cut a deal with the PRC. All the key staff's children will be set for generations and nobody will become a blue haired lesbian or tranny or get gang banged by blacks. That matters.

  5. The level of wishful thinking Genji is engaging in is laughable.

    China's moral degeneracy is on par with the US's, its corruption makes ours look like nothing, its environmental problems are potentially civilization killing, and it has a birthrate well below replacement rate.

    The US has problems coming out its ears, but to anyone who has eyes to see and ears to hear, it's pretty obvious that the rest of the world is even more messed up.

    And this, by the way, is the problem with this attempt to set a new reserve currency. Say what one will about the USA, but one's property and person are still more secure here than they are in Beijing and Moscow–why do you think so many rich foreigners are buying real estate in the West? If it does work out, that'll be a problem, but I'll wait sitting down.

  6. Tom, Old Chap.

    Have you been in China in the last 10 years. Or ever? Been for a ride on a High Speed Train in East Asia not infested by blacks and Squatemalans and meth heads?

    They're far from perfect. But they're on the civilizational cycle upswing and we are not. It's that simple. Your and my (were I not living in East Asia) best option is how to ride the avalanche down the mountain.

    Of course the White Remnant could rise up all over the West or in the supposedly sacred unique exceptional USA and overthrow their degenerate overlords and restore the New Jerusalem or something. And I might win the lottery. Perhaps Justinians and Belisariuses are sprouting in the soil of Idaho as I type this. Or maybe I should just buy a lottery ticket.

    There are tides in the affairs of men. Deal with it.

    Plenty of potential in the American heartland to dig in and sweat it out for 5 generations… but your nation is not coming back. Prognosis for much of Rest of West is even worse.

  7. Since it now requires a bunch more dollars to bribe someone to get them to agree to let you put gas in your car, food on your table and just about anything else you can name, why izzit that the number of dollars required to get them to let you have an ounce of gold hasn't increased to the same degree? Seems like it's been up around $2,000.00 for a long time. It's certainly not going up relative to the inflation rate. I thought that correlation was almost an absolute guaranteed consequence of inflation.
    Anyone have a Readers Digest level explanation?

  8. @Justin_O_Guy: They powers what be have been manipulating the price of gold by offering fake (but official) precious metals bonds for the last couple of years. There is now about 5 times as much "gold" in bonds as there is in reality.

  9. The value of the US dollar is in what backs it up … no, not gold. We gave that up a long time ago.

    What backs up the US dollar is armor, aircraft, steel, ordnance, ships, tanks, and nuclear weapons.

    But the world is learning that those things are only valuable in the hands of people who know what to do with it, when to use it, when to threaten with it. Serious people.

    And people that go around the world starting wars they cannot win, creating anarchy and chaos while claiming to do the opposite, pretending to spread liberal democratic ideology when instead spreading corruption and kleptocracy, are not serious people.

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