There is a lot going on in the financial markets.  Gold surged past $2,000 per ounce.  Oil prices are skyrocketing even more after Biden announced that the U.S. would ban the import of Russian energy (gas and oil).  The price of gasoline may be hitting $5 per gallon by the end of the week.

While price inflation surges, the yield curve is flattening, with the Fed expected to raise its target rate next week.

The U.S. government is placing sanctions on Russia while corporate America joins in to follow the establishment narrative by withdrawing services from Russia.  McDonald’s is closing in Russia for now, and many financial services are halting their services in Russia.

The average Russian may go to the store and find they can’t pay with their credit card.  I don’t remember any of this happening to Americans when the U.S. government invaded Iraq or any other number of countries.

These sanctions do hurt the Russian people quite a bit.  But they also hurt Americans.  Biden will try to blame the economic problems on Putin, even though they were already there before this.  The sanctions will just make things worse.

I wonder about the longer-term impacts to the U.S. dollar.  The U.S. government is playing a dangerous game, and I don’t know if they know it.  The biggest danger is obviously a war, and particularly a nuclear war.  But even if there isn’t an actual war with Russia, there is a financial war, and the dollar may end up being the biggest casualty.

Russia, China, and the Dollar

The U.S. dollar is still considered to be the world’s reserve currency.  A lot of business in the world is done in dollars. This is especially true when it comes to buying oil.

Russia has essentially been forced to abandon the dollar.  The Russian central bank had already sold off much of its U.S. treasuries years ago when sanctions were imposed.

The U.S. government and others are now essentially stealing assets from individuals, as well as from the government and central bank.

You have to believe that the Chinese are paying close attention to what is going on.  The Chinese government owns about $1 trillion in U.S. government debt.

What if China has a squabble with Taiwan or Hong Kong?  What if the Americans don’t approve of something and decide to freeze their assets?  Do the Chinese want to be stiffed out of $1 trillion plus interest of assets?  The question answers itself.

You have to wonder if the Chinese will start selling off U.S. debt.  Or maybe they will stop rolling over any maturing debt.

Even the Japanese government may take notice.  They tend to go along with the U.S. government, but it’s got to make them nervous that one wrong move could cost them over one trillion dollars, which they hold in U.S. government debt.

What will be the result of these brutal sanctions?  Aside from the immediate impact of less trade and more hardship on people, it will result in more countries buying and selling without the use of U.S. dollars.

If this is coupled with the selling off of U.S. government debt by foreign countries (especially Japan and China), we could see the dollar get hit hard.

There is no reason for the U.S. dollar to continue as the world’s reserve currency.  In today’s world, countries can use their own currencies and convert it into the currency of other countries they are trading with.  Why go through the middleman – the U.S. dollar?

This means that life could get even more expensive for the American consumer.  It means that the U.S. government will not be subsidized as much by foreign countries buying the debt.  Politically, it means that the U.S. government will have less clout in the world.

The U.S. government is shooting itself in the foot.  All of these sanctions and outright theft will only lead to a faster decline of the U.S. dollar.

There will no longer be a world reserve currency unless people are wise enough to turn back to gold.