Sunday, 5 April 2026

A Post About Global Economics

I don't pretend to understand Economics and especially the Reserve Currency but when people that do start saying the same thing, then i take it they know what they are talking about.
The US-Israel war on Iran is expensive in terms of human lives but at $12bn a week, it is costing the US which is manageable for a nation with a GDP of $36 trillion but some big players such as The Deutsche Bank and Europe's most high profile Economist, Yanis Varoufakis, are saying that America could be facing a much larger problem, de-dollarisation.
With oil ships backed up in the Strait of Hormuz, Iran is requiring some ships to pay a toll of ¥2m in Chinese yuan and that is where the Economists step in to say that this poses real problems with a country with a national debt of $39tn.
As the owner of the World’s reserve currency, America can force the Swift communications network (the infrastructure used to connect banks around the world with one another)  to cut off and isolate countries and the cost of doing business rises dramatically putting America in a strong position.
Russia and China and a handful of other countries have been making efforts to replace Swift and the US dollar as the reference currency and Brazil, India and South Africa are said to be working to integrate with this system.
Now, Iran’s effort to shift trade through Hormuz from the dollar will succeed if Asia, which is where most of the oil and gas is bound for, chooses to pay in Chinese currency which then can also be used to buy Chinese goods and weaken global demand for dollars.
The Deutsche Bank assessment indicates that the conflict could trigger the decline of petrodollar supremacy while increasing the the petroyuan system, mainly due to the alternative mechanism already existing, CIPS, which provides a payment channel that allows banks to settle transactions without routing the money through the U.S. banking system and nations already agreeing to pay in Yaun to get their ships past the Iranian blockade.
As i said at the beginning, i don't know what all this means or if this is the start of the American Economy falling over but with Trump throwing around Tariffs, insults and starting wars, you can see why it might appeal to some nations who may want to move away from America and to be honest, everything Trump touches turns to crap so might be worth keeping an eye on. 

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