Because of Biden’s policies, the U.S. dollar may lose its status as the world’s reserve currency. Tucker explains what is happening, and what may happen as a result.

Economic sanctions, supposedly to hurt Russia, have hurt us. Many large countries, many of whom have historically been our allies, have moved away from the dollar as an asset. Our borrowing power is contracting, and we all realize that our Congress relies on borrowing.

Biden’s efforts to crush the Russian currency has failed, but he has managed to destabilize ours.

CNS NEWS

Last week, China and Brazil reached an agreement to settle trades in one anothers’ currencies. Over the past 15 years, China has replaced the United States as the main trading partner of resource-rich Brazil, and as such that shift may have been inevitable. But within the context of recent circumstances, this appears to be another in a series of recent blows to the central role of the dollar in global trade.

[. . .] The switch from dollars to a yuan-real settlement basis in Chinese-Brazilian trade is only the latest in a growing trend. Discussions of a more politically neutral reserve currency have gone on for decades. The profound economic disruption experienced by Iran, and more recently Russia, after being evicted from dollar-based trading systems like SWIFT, however, have led many nations to consider imminent contingency plans. India and Malaysia, for example, have recently begun using the Indian Rupee to settle certain trades, and there have been perennial warnings about Saudi Arabia and other energy exporters moving away from the dollar. On that note, China also recently executed a test trade for natural gas with France settled in yuan.

[. . .] Owing to the role that dollar pervasiveness plays in the international appetite for U.S. Treasuries, a side effect of the long-term attempt to establish alternative reserve currencies may be decreasing interest in tradable U.S. debt. Over shorter time frames, that would likely result in higher yields and higher levels of debt service on securities issued by the U.S. Treasury. Over generational time frames, that shift could force a reduction in U.S. government spending. Should that scenario play out, the long-term effect of using access to dollars as a bludgeon of American foreign policy could well be higher average inflation and/or higher taxes on American citizens.