The recent sanctions imposed by the Biden administration against Russia demonstrate the U.S. using the global reserve status of the dollar to advance its foreign policy objectives, but experts warn that this approach could lead to economic turmoil and exacerbate inflation for Americans.
On Wednesday, the Treasury Department introduced new sanctions against Russia aimed at curtailing the flow of money and resources that could support the country’s war efforts in Ukraine. In response, Russia announced an immediate halt to dollar transactions on the Moscow Stock Exchange, as reported by Reuters. This move represents a further step in Russia’s shift away from the dollar, highlighting a broader trend of U.S. adversaries resisting the global dominance of the dollar. Experts speaking to the Daily Caller warned that a global move away from the dollar could lead to significant inflation and force the U.S. to address its escalating national debt.
“If the Biden administration were intentionally trying to destroy the dollar, I’m not sure what they’d do differently,” E.J. Antoni, a research fellow at the Heritage Foundation’s Grover M. Hermann Center for the Federal Budget, told the Caller. “His spendthrift agenda has resulted in the dollar losing one-fifth of its value in less than four years, and his international policies have done even more harm by eroding the dollar’s reserve currency status. By freezing and then eventually stealing dollars owned by foreigners, Biden sent a clear message to the world that the dollar is no longer a safe asset.”
Since Russia initiated its invasion of Ukraine in 2022, the Biden administration has taken notable actions to leverage the financial system against Russia. This includes the U.S. and its allies excluding many Russian banks from the global financial messaging system, SWIFT, and freezing hundreds of billions of dollars in Russian foreign reserves. The measures are part of a broader strategy to apply economic pressure on Russia.
“A Rubicon was crossed in the form of policy choices made in the immediate aftermath of the Russian invasion of Ukraine in early 2022,” Peter Earle, economist at the American Institute for Economic Research, told the outlet. “Those decisions included seizing hundreds of billions of dollars worth of Russian FX reserves (Russian holdings of US dollars) and ejecting most major Russian financial institutions out of the SWIFT messaging system.”
“In taking those actions, Russia was effectively kicked out of the U.S. dollar system,” Earle added. “It was a turning point as it has put adversaries — and allies — of the United States on notice that the dollar, which has for seventy years been the default currency for international trade and settlement, can be weaponized, and thus that dependence upon the dollar comes with a heretofore unconsidered risk.”
“Russia’s suspension of trading in dollars on the Moscow exchange is just the latest domino to fall, and it won’t be the last,” Antoni told the DCNF. “As de-dollarization snowballs, foreigners won’t want dollars anymore, and they’ll start exchanging the currency for American goods and services. It’s no exaggeration to say that this will mean 70 years’ worth of trade deficits pouring back to our shores.”
Further reduction in the use of the US dollar, depending on how quickly it happens, could lead to another wave of inflation, the Caller reported. Inflation has already caused significant financial difficulties for the average American under the Biden administration, with prices increasing by 19.3% since January 2021. Inflation has not dropped below 3% since it reached its highest point under Biden at 9% in June 2022, most recently measured at 3.3% in May.
“If you think the last three years have had bad inflation, just wait until those trillions of dollars currently held by foreigners come home and start bidding up prices,” Antoni continued. “It will embolden our adversaries and impoverish Americans. We’re in the opening stages, and it’s unclear if there’s enough time to stop it.”
If former President Donald Trump wins the November election, there should be no doubt that Democrats will blame any collapse on him, even as they are watching what Biden and his handlers are doing now.
