“Bank of Elizabeth II” Is Going to Bring Down the Dollar

Due to the enchanting in its randomness, scandalous, and unpredictability of the G7 summit, the global information space has paid insufficient attention to a much more significant event: in the Anglo-Saxon world, London’s revolt against Washington is unfolding, with this revolt being of an economic and monetary nature, which is much more important than any political rapprochement with the United States that Prime Minister Boris Johnson can expect after a hard Brexit. While at the political level Johnson himself is doing his best to get close to Donald Trump, at the financial level there is a reverse process: Mark Carney, Chairman of the Bank of England (Central Bank of the United Kingdom), announced the need to revise the global monetary system and that the existing US dollar-based system needed to be urgently replaced with some new “digital asset” or “digital currency”.

The special piquancy of Mark Carney’s demarche comes from two details that were noticed by the journalists of the Canadian version of Bloomberg: the head of the British Central Bank made this aggressive statement in the United States at the annual Western Financial Leaders Symposium in Jackson Hole, held under the patronage of the Federal Reserve Bank of Kansas, i.e., the United States Federal Reserve. One should have very good reasons to come to visit bankers and financiers whose life, wealth, and social position depend on the status of the American currency and to state in direct text that actually this privileged status should be immediately lowered to about the level of the floor.

The second important detail: what the UK’s top banker offers is very much like “Libra Project” – i.e., the digital currency that a consortium of leading (mostly American) financial and technology companies is about to launch. The project has already drawn anger and criticism from Donald Trump. The President of the United States rightly considered that the digital currency Libra, which is trying to launch a consortium consisting of Facebook, Mastercard, Paypal, Stripe, Visa, Ebay, Lyft, Uber, Vodafone, and other large companies, poses a direct and serious threat to the monetary sovereignty of the US and the status of the dollar. It is logical to assume that Mark Carney’s proposal of a similar nature and even form would trigger an equally painful and aggressive reaction from the Trump administration. The head of the Bank of England immediately stated that the consortium project, whose ideological inspiration is Facebook, cannot yet be an alternative to the dollar as the main currency of the planet, but the London banker has an even more interesting proposal: to create, in fact, the same digital currency, only on the basis of a consortium that will consist not of private (mostly American) financial and technological companies, but of central banks of different countries. In translation from diplomatic language: the Fed is proposed to take off its crown and become an “equal member” of the collective organisation of central banks that will issue the global “digital currency”.

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In order to understand the logic of the Washington administration’s reaction (by the way, there will be such a reaction regardless of the name and party affiliation of a particular US president), it is only necessary to take into account the fact that the reasons why the dollar enjoys really serious demand in the world market are not related to the American economy and its achievements. The first reason: the status of the dollar as the main world currency for which key goods, such as oil and grain are traded, and through which the majority of exchange transactions take place – for example, in the exchange of conditional tugrik for euro actually is performed according to the scheme “tugriks into dollars, then dollars into euro”.

The second reason: colour revolution specialists or strike groups of American aircraft carriers come (due to suddenly discovered human rights violations) to those who do not want to sell their oil or other exports in dollars. Mark Carney’s proposal is kicking the stool out from under the dollar, and its implementation will inevitably lead to serious problems for the US budget and the financial system as a whole, which, in turn, will severely limit the possibility of even using aircraft carriers.

By the way, in Reuters’ recount, the position of the head of the Bank of England sounds like a conviction against the US currency and the system built on it: “Emerging economies had increased their share of global activity to 60% from around 45% before the financial crisis a decade ago, Carney said. But the dollar was still used for at least half of international trade invoices – five times more than the United States’ share of world goods imports – fuelling demand for U.S. assets and exposing many countries to damaging spillovers from swings in the U.S. economy.”

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And another important nuance: Mike Carney just eight months ago said that the dollar would be replaced as the main global currency, but then he believed that the new currency hegemon would be the yuan.

“As the world re-orders, this disconnect between the real and financial is likely to reduce, and in the process other reserve currencies may emerge. In the first instance, I would expect these will be existing national currencies, such as the RMB [yuan],” said the head of the Bank of England in January, specifying that the transition from the dollar to the yuan will take a long time.

Now Her Majesty’s “chief banker” has changed his position, and Reuters writes that Carney has changed his plan: “China’s yuan represented the most likely candidate to become a reserve currency to match the dollar, but it still had a long way to go before it was ready. The best solution would be a diversified multi-polar financial system, something that could be provided by technology, Carney said.”

A cynic (or conspiracy theorist) would suggest that such a change in the air is due to London’s failure to agree with Beijing on mutually acceptable terms of cooperation on this issue. Or that London suddenly felt a chance to “dazzle” the international anti-dollar coalition, in which the Bank of England would have an important role. In any case, a significant additions has appeared in the regiment of those who want to collapse dollar hegemony – and even if London is already sharpening the knife to stick in Washington’s back, the question of whether the US has real friends or allies on the planet can be considered rhetorical.

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Ivan Danilov

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