History Was Made Tuesday
And it's probably not for the reason you might think.
Yesterday was so jam-packed with news that it’s difficult to even know what to focus on…
…wait, no it isn’t.
While many in the crypto-verse were busy stewing over the release of what has been dubbed “The Hinman Papers” and the normies argued about the indictment of Trump, this little nugget attributed to the money troll is quite something:
expect a slow decline in the dollar as reserve currency
Uhm. Wow.
In case you’re not keeping up with me, the money troll is Janet Yellen. As in current US Treasury Secretary and former Federal Reserve Bank Chair Janet Yellen. This is a rather stunning statement. In part because it contradicts what she said in late March according to Reuters:
U.S. Treasury Secretary Janet Yellen said on Thursday she remained confident the U.S. dollar was going to remain the global reserve currency even as she remarked that Russia and China may want to develop an alternative to it, which she described as difficult to achieve.
Look, I’m not here to pick on Janet. Truly. She has a history of doing this. By “this” I mean lying first and then telling the truth later - which is admittedly more than I can generally say about the rest of these grifter system shills. Whether by accident or not, Yellen eventually spills the beans. I guess Uncle Jerome does too now that I think about it…
Anyway, shortly after the proxy war with Russia began, Yellen insinuated the weaponization of the dollar wouldn’t threaten USD reserve currency status. Per Bloomberg from March 2022:
Treasury Secretary Janet Yellen said the U.S. dollar is in no danger of losing its status as the world’s dominant reserve currency as a result of sanctions imposed against Russia over its invasion of Ukraine.
Fast forward to just this April, she flip flopped and acknowledged that dollar weaponization could actually incentivize alternative currency usage. Telling CNN:
There is a risk when we use financial sanctions that are linked to the role of the dollar that over time it could undermine the hegemony of the dollar
Wild that it took her a year to end up on the right side of that given an idiot with a blog spelled it out in February 2022 when I mentioned the possible implications of weaponizing SWIFT:
I think kicking Russia out of the SWIFT system is almost as bad for the global dollar standard as it is for Russia. The US doesn’t want a country as big as Russia proving it doesn’t actually need SWIFT.
If you joined the stack after that piece was written, you can read the whole thing here:
Yes, you’ll have to go premium to see it. But I really think it’s worth a read.
Yellen said a lot of other interesting things Tuesday as well. She addressed fears from some in Congress that China could be preparing to dump its massive treasury position - a move that probably only makes sense for China if the country is willing eat massive losses on those holdings rather than simply letting them mature. To me, that probably only makes sense if China is convinced they won’t be paid back for some reason. Hmmm…
Reminder I’m not a geopolitical expert or strategist and I only read The Art of War one time. But back to Yellen for a moment; while she claimed there is no meaningful workaround to the dollar for a global currency, there may not necessarily be an immediate need for a global reserve currency at all in certain places.
Elsewhere on Tuesday, Kenyan President William Ruto said this when talking about how the Afreximbank will begin handling settlement in local currencies between African countries:
Why is it necessary for us to buy things from Djibouti and pay in dollars? Why? There is no reason. And we are not against the US dollar. We just want to trade more freely. Let us pay in US dollars what we are buying from the US.
The moral of the story is the people in charge of the system are running a confidence game. In a matter of just months, we’ve gone from “sanctions won’t hurt dollar reserve status” to “sanctions might hurt dollar reserve status” and now “losing reserve status will be slow.”
If they’re telling you it will be slow, it’ll probably be the opposite and it’s likely already started. That doesn’t mean you have to rush to dump your dollars tomorrow to get ahead of a hyperinflation. But it does probably mean we have some hard times coming. The days of being able to trade our inflation to foreigners for real goods is coming to end. The good news is we’re going to actually start making things domestically again. The bad news is things are probably going to get more expensive.
Disclaimer: I’m not an investment advisor or geopolitical analyst. I wrote this with potato chip crumbs on my exposed belly and haven’t worn a neck tie in 4 years. The first sentence of this disclaimer was true.