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In this video we go over the economic sanctions the US has levied against Russia and how this relates to the weoponization of the dollar. This could also threaten the US dollar's status as the global reserve currency.
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What's up guys and welcome back to wall street millennial on this channel, we cover everything related to socks and investing by this point. We all know that russia's economy has been devastated by economic sanctions from the western nations as a leading economic superpower. Sanctions from the us have been the most significant economists believe that russia's economy could shrink by as much as 10 in 2022 and inflation could soar to 20 percent. The most important aspect of a prolonged military conflict is having the money to sustain it with economic sanctions.

The us has dealt a crushing blow to putin's war machine without putting a single boot on the ground, but how does the us have so much power? It all comes down to the us dollar status as the world's reserve currency coming out of world war ii, europe, japan and the soviet union had their cities destroyed by years of bombing. The u.s was the only major country with its industrial capacity still intact. They used this advantageous position to negotiate the bretton woods agreement in 1944, which established the us dollar as a world reserve currency. Within just a few years, america was able to replace britain as the global financial superpower.

This ushered in a new world order, where almost all large international transactions were done in dollars. If you want to run an international business anywhere in the world, you need us dollars. Dollar dominance has given the u.s two key advantages. Firstly, is allowed the country to live beyond its means for decades, importing more than exports and having artificially low consumer prices.

Secondly, the us can weaponize the dollar to inflict crushing blows on its political adversaries. Us administrations have used this strategy for years. Targeting countries like iran and venezuela, these are relatively small countries who are not terribly important within the world economy. But now the binding administration has set its sights on the biggest target, yet unleashing the full force of economic warfare against the russian federation.

While russia's economy has stagnated in recent years, it is still the 11th largest in the world, with 1.5 trillion dollars of annual gdp and hundreds of billions of dollars worth of foreign currency reserves in an action of unprecedented scale. The us and its western allies have frozen 300 billion dollars of the russian central bank's foreign reserves. In real terms, this amounts to perhaps the largest drug pull operation in world history. U.S financial institutions are now required by law to cut off relationships with their russian counterparts, effectively freezing billions more in russian owned assets.

At the end of the day, us dollars are pieces of paper that only have value, because people think they do, and this value has been supported by trust in the u.s financial system built up over the past 70 years. Over the years, the us has used the dollar to its advantage in ever increasing ways with the russian sanctions. We may be finally reaching a breaking point, so what does it mean for the us dollar to be the world's reserve currency? The value of a nation's currency is determined by supply and demand. The country produces a certain amount of output per year.
The government issues a certain amount of currency, the more currency you issue the more dollars it will cost to buy any given good. It's the job of the central bank to gradually increase the money supply over time to match the rate of real economic growth, thereby maintaining a stable rate of inflation, but the us dollar, as a global reserve currency, complicates this picture when the fed prints more money. This seeps into the real economy and people have more money to spend, but not all of this is spent on us-made goods. Much of it is spent on foreign imports.

Over the past 30 years, the us has run a balance of payments deficit with the rest of the world, meaning that it imports more than exports. This deficit reached a record high of 850 billion dollars in 2021, is on track to be even higher. In 2022, there's been a massive net inflow of goods coming into the us, but how is that possible? Why are foreign countries willing to send more to the us than they get back in return? It all comes down to the power of the us dollar. Foreigners want to get their hands on dollars.

Multinational corporations want to increase their dollar reserves for use as working capital, and importantly, foreign central banks build up massive war chests of us dollars which they can use to support the exchange rate of their own currencies. During times of crisis, the excess foreign demand for dollars gives the federal reserve a tremendous amount of latitude to print money. For example, the us increased the money supply by almost 50 since the beginning of the pandemic, while inflation did increase. A lot of these new dollars were soaked up by foreign buyers.

The u.s status as reserve currency makes hyperinflation all but impossible, no matter how reckless the federal reserve gets with the money printer. In practical terms, this can be seen as a relative overvaluation of the us dollar exchange rate, an item that would cost one dollar in the u.s cost: 92 cents in the uk, 76 cents in italy, 65 cents in china and just 36 cents in russia. Because of this u.s, consumers can buy foreign imports for a fraction of the cost to produce them domestically, but how's. All this relate to the current situation in russia.

Over the past decade, russia has been a net exporter thanks to their booming oil and gas industries. They use these trade surpluses to build up 600 billion dollars of foreign currency reserves. They've basically been doing the opposite of what the us has been doing, living below their means and the people were forced to suffer under artificially high import prices. This was all done strategically.
So they would have sufficient reserves to prop up their currency in the event of future sanctions. It's no different than if you saved 10 of your income per year to build a rainy day fund if you ever get laid off in this case. Their savings account for the us dollars was the federal reserve, but right after the war began, the us, along with a consortium of its allies, froze 300 billion dollars of russia's currency reserves held at the fed european central bank bank of england and bank of canada. Imagine if you spent years building up ten thousand dollars worth of savings and deposited it at your local bank branch say you fell on hard times and want to withdraw your savings.

But when you try to use your debit card, it's declined. It turns out the bank froze your account effectively expropriating all of your money, because now they don't like you, that's basically what the us and its allies did to russia. We've all seen the atrocities that the russian military has committed in ukraine with much of the footage. Too graphic to be shown on youtube to be clear, we're not saying any of the sanctions against russia are not justified, but at the same time the decision to freeze the russian central bank's assets is perhaps the most extreme weaponization of the dollar that we've ever seen.

Many countries which are competitors or even adversaries of the us still rely heavily on u.s dollars because they need them for international transactions. For example, almost all international oil transactions are settled in u.s dollars. Multinational oil companies might sell oil to dozens of countries. It's much simpler to always make payments in u.s dollars instead of dealing with dozens of different currencies.

So, regardless of what you think about the us, you have to use u.s dollars, but seeing how the us froze russia's assets overnight. Many nations are now growing weary of this arrangement. Shortly after the ukraine war began, saudi arabia started negotiations with china to potentially start accepting chinese yuan as a payment for oil exports being as dominant as they are in heavy industries. China is the single largest importer of oil and accounts for 25 of saudi arabia's exports.

If they go through with this transition, the dollar's hegemony and the 14 trillion oil market would be severely challenged. The people's bank of china owns 3 trillion of foreign currency reserves. About half of which are thought to be u.s dollars, central banks globally hold 7 trillion dollars in dollar reserves compared to just 300 billion worth of chinese yuan. Seeing what happened to russia recently many countries will be keen to reduce their exposure to us dollars if oil exporting countries like saudi arabia transitioned to accepting chinese yen as payment.

This could have massive implications. Importing countries all over the world would start selling part of their us dollar reserves to buy yuan. In addition to foreign central banks becoming weary of us dollars, billionaires will also become weary of investing in the us or western europe. Under the code name, project klepto capture, the us and its allies have been systematically hunting down and impounding luxury yachts and real estate associated with so-called russian oligarchs oligarchs are rich.
Russian billionaires who the u.s intelligence agencies claim have ties to vladimir putin. Their investments in u.s hedge funds have also been frozen indefinitely. It's unclear what power, if any, of these so-called oligarchs have over vladimir putin, but one thing isn't near certainty. Foreign billionaires will start to think twice before making any significant investments anywhere.

The us government can get their hands on all. This will mean less demand for the us dollar, which will cause depreciation. If the us dollar loses its status as the global reserve currency, the country will, for the first time in 30 years, be forced to live within its means and import only as much as it exports that'll mean higher prices for imported goods, a piece of imported clothing Which used to cost twenty dollars could cost forty dollars instead, so you'll only be able to consume half as much to prop up the dollar. The fed could be forced to raise interest rates sharply dramatically, increasing the government's interest, expense and forcing them to raise taxes.

When and if this happens, american living standards could decrease dramatically in a very short period of time with all that being said, the dollar status as reserve currency has been built up over many decades, and the existing global financial system has been built on this premise. Dedularization would be a gradual process and take many years, but the more aggressive the us foreign policy becomes with regards to weaponizing the dollar, the more likely it will become. Alright guys that wraps it up for this video. What do you think about the weaponization of the dollar? Let us know in the comment section below also don't forget, to open an account with moomoo and get up to five free stocks, valued at up to seventeen thousand dollars, use the link in the description below.

As always, thank you so much for watching and we'll see you in the next one wall, street millennial signing out.

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25 thoughts on “How the us is weaponizing the dollar”
  1. Avataaar/Circle Created with python_avatars EZ435 says:

    Also US products that’s being produce in the foreign countries and being sold on that country alone, the prices is being inflated, more like double or tripled than what they are sold here in the States.

  2. Avataaar/Circle Created with python_avatars Michael Wang says:

    Just as a note, China and the world has been trying to move towards "a basket of currencies" instead of the USD as the world's reserve currency for many years now as the Euro and Renminbi/aka Yuan have become stronger. One of the reasons the Saudi's have made this move is because of the declining foreign relationship status between the US and Saudi Arabia. The underlying of this probably has many factors including the emergence of the U.S. as the dominant non-OPEC economic competitor when it comes to oil/gas, war in Yemen (Saudi), and the murder of Jamal Khashoggi by Saudi Crown Prince Mohammed bin Salman. Saudi Arabia is an authoritarian government, relations are good when the U.S. supports them; but the U.S.'s liberal democratic values fundamentally clash with those of the Saudi government; so this is increasingly causing a schism between the two; China, on the other hand, is also an authoritarian government, and it's economically dependent on middle-eastern oil, of which Saudi heads, this gives Saudi Arabia greater leverage and influence in China; so it's no surprise that they are moving closer together as the US-Saudi relationship declines. China is the one who is really afraid of the U.S. using global economic warfare against them, which is why they threaten to the U.S. against secondary sanctions of Chinese companies, who continue to do business with both the West and Russia… This is one of the fundamental reasons why the entire belt and road initiative (BRI) was created to help China create a more Sino-centric world order even though many of it's investments operate at a loss; also see China's creation of things such as the Asian Infrastructure Investment Bank (AIIB) in Beijing.

  3. Avataaar/Circle Created with python_avatars Mshuk1 says:

    RISE OF THE EAST AND DECLINE OF THE WEST! In the next 20 years, the US empire is going to shrink at a lightning pace and mainland US is going to be a right-wing sh*thole where the dumbest of human beings fight for supremacy. Thank god for the changing world order!!!

  4. Avataaar/Circle Created with python_avatars Hanson Lee says:

    Good video, but Saudia Arabia changing its currency to Yuan is not very likely atm due to its very unstable political situation that needs US military support.

    Even though you make a good point about how weaponzing the US dollar can have problems, the alternative currencies (including crypto) have yet to establish its foundation as "the standard" especially when those governments have much more aggressive monetary and economic policies to inflate their economic standings compared to the US.

    Thus, this video is too much of an unlikely doom-and-gloom scenario

  5. Avataaar/Circle Created with python_avatars RitzBittz says:

    I think you mistate that increased interest rates would only affect the governments NEW debt. Existing debt would not become more expensive. Additionally I think it’s worth noting the fed reserve pays all profits back to the treasury, so if the fed owns all or most of the gov debt, it effectively costs the government nothing to finance their debt.

  6. Avataaar/Circle Created with python_avatars Glenn Chartrand says:

    Russia is a Petro-State.
    It's more like Iran than a modern Europe Country.
    ( And under Putin it becomes more like Iran every year)

    Europe and America have become convinced that Putin is embarking on a campaign of military expansion that could lead to WWIII.

    So they are making Putin's invasion of Ukraine as painful as possible in order to discourage him from invading other countries.

    The driving force behind the sanctions is the fear of war between NATO and Russia.
    Leaders are willing to suffer a lot of economic pain to avoid it.

  7. Avataaar/Circle Created with python_avatars Zhong Xina says:

    We're not doing anything to Putin/Russia he wouldn't do to us if he had the chance.

  8. Avataaar/Circle Created with python_avatars Morale says:

    This is interesting.. So, Americans would be forced to pay what it costs. I see nothing wrong with this. I have been doing this the last 35 years. Live within your means.

  9. Avataaar/Circle Created with python_avatars Raymond Aung says:

    until China dare to fight outside of its boarders it will be hard to topple US to keep their interests on foreign soils.
    You need bigger fist to say what you say is right on global stage.

  10. Avataaar/Circle Created with python_avatars youtubetim says:

    Russia devastated? Are you just listening to news clown? Go look the actual values, everything has recovered to all time highs its just transfer of assets, cause russia stocks are wat better then us stocks the divies are insane they cycle every number of years and "crash" noob

  11. Avataaar/Circle Created with python_avatars Adi - says:

    Why do you say this. There are a comparable number of transaction on energy supplies, done in euros.

  12. Avataaar/Circle Created with python_avatars Philipp Ludwig von Seidel says:

    Just wait for the Saudis start selling more oil for other currencies. That will be the end of the petrodollar and the start of the gas-agro rubble.

  13. Avataaar/Circle Created with python_avatars Paul Solin says:

    I don’t think that the US is headed to the gloom and doom scenario that you’re describing as we have many other trading partners. The world’s economies responded to this war together. Also, there will be a big push for renewables in the next few years because of all of this. Consider the brain drain in Russia over the past few decades, and it looks bleak for them. Countries like SA are actually diversifying in other technologies with their oil money. This all could rapidly be turning Russia into a failed Petrostate.

  14. Avataaar/Circle Created with python_avatars JohnE says:

    At the end of World War II Churchill described an iron curtain that had descended around the Soviet Union. It became completely economically isolated from the rest of the world until Gorbachev. As it had already been isolated since the revolution in 1917.
    This financial isolation and restriction will not have any effect on the Russian military. None at all.
    They can and probably will carry on without the rest of the world as long as Putin desires.
    So they can wage this war in the Ukraine for years, and years, and years. Until they fully capture it. Permanently.

  15. Avataaar/Circle Created with python_avatars Chop Shop says:

    I love your videos but "Allegedly Oligarchs have connection to Putin", there is nothing alleged about it they were directly responsible for putting Putin in charge because they believed they could control him. However once Putin took power he then took power from the Oligarchs and declared himself the Head Oligarch and that is a fact.

  16. Avataaar/Circle Created with python_avatars kaanboztepe says:

    thx for doing what i have never seen anywhere else yet , what the sanctions could mean for those who impose them

  17. Avataaar/Circle Created with python_avatars Morwick Chesterham says:

    Russia has USD 600 Billion as a reserve… the U.S.A. has USD 250 Billion…

  18. Avataaar/Circle Created with python_avatars Tobacc0 says:

    Sanctions are a tool of the neocons who are ideologues, not economists. They don't care if small, uninvolved countries like Sri Lanka get destroyed by their actions as collateral damage.

  19. Avataaar/Circle Created with python_avatars ktktktktktktkt says:

    I think you meant wary. Weary sounds similar but means something different which I don't think fits in the context.

  20. Avataaar/Circle Created with python_avatars Bryan Killeen says:

    Ha ha this is ridiculous USA is the rock of Gibraltar and that’s why people invest in it China is the opposite of the rock of Gibraltar, keep investing in China you can make a video of you crying. If USA listening to people like you we would be a crappy Third World country but thankfully we don’t think like you.

  21. Avataaar/Circle Created with python_avatars Mister Musturd says:

    Love you WSM. Keep up the good work!
    Also keep up with the news.
    This topic was thoroughly explored before the sanctions were even levied.

  22. Avataaar/Circle Created with python_avatars Connor says:

    Prefer your better researched videos on corporate scams and the like. Feels like you're just chasing a clickbait topic

  23. Avataaar/Circle Created with python_avatars TayZonday says:

    With the Federal Reserve banning the public printing of money, abandonment of gold-backed (in favor of fiat) currency to facilitate asymmetrical hyper-growth, fractional reserve banking, global hegemony that makes Americans compete with foreign slave-wages and many other “cheats” — the dollar has been weaponized against Americans for decades. “Too far” is what we experience at home.

  24. Avataaar/Circle Created with python_avatars Jon says:

    Fiat means never having to admit you were wrong. Because magical government decrees 🎩 🪄 🔮 ✨️

  25. Avataaar/Circle Created with python_avatars Jozylocs 510 says:

    Is anyone considering buying Chinese Yen for the future? Considering China manages to stay on the sidelines as everyone goes at it with each other

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