COMMENT: Mr. Armstrong, I simply needed to thanks for collaborating in our board assembly. We had come to the identical conclusion that every one of this speak of BRICS and de-dollarization was being promoted by folks within the conspiracy class, missing any trustworthy expertise in worldwide commerce. Earlier than the assembly, we known as one, and our Chairman listened. They might not reply any actual financial query. The claims that that is the tip of greenback hegemony solely uncovered their lack of know-how.
Trump’s tariffs, Biden’s sanctions, and the freezing of Russian belongings had been all presupposed to kill the greenback as Russia, China, India, Brazil, and South Africa had been to assemble parallel monetary programs as if they’d not promote to the US. Then there was the point out of backing by gold. Our chairman was very impressed that you might reply each query. You pointed us in the proper course with widespread sense and your real-world expertise.
Thanks as soon as once more. As you mentioned, U.S. is about one third of your entire world client market, and international monetary transactions to IPO are predominantly in {dollars}. Our Chairman will likely be at your WEC personally this time.
SFD
ANSWER: Thanks. As a result of that is such an vital matter and I do not need the time to attend each board assembly internationally, I believed it greatest that I lay out the gist of our discussions. Your organization is within the international enterprise, and it’s pathetic how nearly all of these folks preach the identical nonsense with out understanding world commerce. The US greenback’s dominance in worldwide finance is evident regardless of BRICS, however its share varies throughout totally different areas. Earlier than World Warfare II, nations issued their debt in British kilos as a way to promote it in London. At the moment they subject in {dollars}.
U.S. Multinational Dominance: U.S. firms earn huge earnings abroad. That is the PRIMARY motive why these analysts don’t perceive world commerce. Apple, Microsoft, and Pfizer all generate greater than 50% of income overseas. In 2022, U.S. multinationals earned $1.6 trillion from international associates (BEA data). Then there’s the Mental Property (IP) and Companies resembling our agency with places of work all over the world. The US is a web exporter of IP, royalties, and high-value providers (e.g., Google’s advert income overseas).
The US historically runs a items deficit (manufacturing) of $1 trillion/yr however a providers surplus of $300 billion if we take a look at the accounting primarily based on the possession of firms quite than location, US abroad affiliate gross sales ($6 trillion/yr) dwarf international affiliate gross sales within the US ($4.5 trillion/yr). Now throw within the web IP receipts ($100 billion surplus), the U.S. possible reveals a web Dealer Surplus on an possession foundation.
When mixed with providers, IP, and abroad earnings, the general steadiness shifts to a surplus. The US advantages disproportionately from globalized manufacturing as a result of its corporations seize worth by way of branding, R&D, and IP—parts obscured by conventional commerce metrics. This highlights why commerce deficits alone are an incomplete measure of financial well being. Wanting on the ownership-based accounting higher displays the place worth is captured in international provide chains. I’ve argued this in Washington, nevertheless it goes in a single ear and out the opposite.
International Commerce Invoicing & Settlement (Main Focus):
Roughly 40-50% of all international commerce (exports) is invoiced in US {dollars}. This implies the costs of products traded internationally are set in {dollars}, whatever the nations concerned. Over 80% of world commerce finance (letters of credit score, and so forth.) is performed in {dollars}!!!!! Round 88% of world international change (FX) transactions contain the US greenback on one aspect (in response to the BIS Triennial Survey). This underpins commerce settlements and makes the entire silly argument of de-dollarization laughable, for they’re mixing geopolitical with economics.
SWIFT information (fee messages) accounts for roughly 46-48% of worldwide fee messages (by worth) which might be denominated in USD (as of mid-2024). It is a key indicator of precise settlement forex. On condition that the most recent client spend on the finish of 2025 quantities to $55.5 trillion, of which the American client is now $17.9 trillion, US client spending accounts for 32.3% of your entire world! So, will BRICS displace the greenback? Come on. They mentioned the identical BS in regards to the Euro. America is the LEAST socialist nation, and that above all accounts for its Dominant Share of the world economic system. Regardless of having solely about 4% of the world’s inhabitants, the U.S. persistently accounts for practically one-third of world client spending. This underscores the immense measurement and significance of the U.S. client market to the worldwide economic system and thus the greenback.
The greenback’s dominance does impression client spending globally as a result of many items that buyers purchase regionally are imported in different nations. If these imports had been invoiced and paid for in {dollars}, fluctuations within the greenback’s worth might have an effect on native costs (inflation/buying energy). That is why your key commodities like oil, metals, and grains are predominantly priced in {dollars}. Adjustments within the greenback have an effect on the price of power and uncooked supplies globally, impacting manufacturing prices and in the end client costs for an unlimited array of products. When the US is about 1/third of the world’s client spending and about 50% of all world commerce, that’s the reason they’re priced in US {dollars} quite than the pesos.
The subsequent HUGE space these one-issue analysts ignore is the Debt & Monetary Markets. International locations and companies borrowing in {dollars} face compensation prices affected by greenback power, influencing their economies and doubtlessly client spending energy inside these nations. This has usually been one space that I get known as into rather a lot. Foreign money Pegs/Reserves have been a crucial subject through the years. Many nations handle their currencies relative to the greenback or maintain vital greenback reserves, influencing their home financial coverage and financial stability. This consists of International Change Reserves. The greenback constitutes about 59% of allotted international international change reserves held by central banks (IMF COFER information Q1 2024).
Roughly 75-80% of rising market (EM) exterior sovereign bonds are denominated in US {dollars}. For company EM bonds, the share is barely decrease, round 60-70%. As I identified, earlier than World Warfare II, EMs would subject their debt in British kilos as a result of that was the place there was a market to promote their debt. At the moment, the pound has been changed with {dollars}, and the FINANCIAL CAPITAL OF THE WORLD is now New York – not London or Paris.
Of the Sovereign Debt points globally (Authorities Issuance), that works out to be 75-80% USD-denominated (e.g., IMF, BIS, and J.P. Morgan EMBI Index information). For instance, as of 2023, over 75% of EM authorities bonds held by international traders had been in USD. Flip to the company world. There we see 60-70% USD-denominated company debt points (e.g., Financial institution for Worldwide Settlements information). That is even greater in sectors like commodities or multinationals.
New York Metropolis is unequivocally the world’s main international monetary middle, and its banks play a dominant function in key facets of worldwide banking. This ensures the greenback’s function in international transactions. The overwhelming majority of worldwide commerce and finance is performed in USD. NYC banks are on the coronary heart of that system. On a clearing foundation alone, the Clearing Home Interbank Funds System (CHIPS) in NYC clears roughly $1.5 trillion every day in cross-border USD funds. That represents a large share of world USD flows.
Then there’s the Correspondent Banking community. Main NYC banks act as correspondent banks for hundreds of banks worldwide, facilitating their worldwide USD transactions.
Funding Banking (Capital Markets) takes place within the coronary heart of the NYC-based banks (Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup) and this persistently dominates international facets of Mergers & Acquisitions, Fairness and Debt underwriting (IPOs, bond issuances), and Gross sales & Buying and selling (particularly of US Treasuries, the world’s most profound and most vital bond market). Even when we take a look at the worldwide funding banking charge income, you can see that greater than 50% takes place in New York Metropolis.
Europe and Britain, together with India and Switzerland, cancelled their forex. The $500 and $1,000 Canadian banknotes had been withdrawn from circulation and are not authorized tender as of January 1, 2021. Nonetheless, they’ll nonetheless be redeemed at banks or the Financial institution of Canada for his or her face worth, and so they might maintain further worth for collectors. Trump has proposed bringing again the $500 invoice. But, whereas Roosevelt stopped issuing high-denomination payments, they’re nonetheless legitimate. It is a MAJOR subject that the greenback stays the reserve forex all over the world – it’s TRUSTED!!!!!! Whereas 60% of all U.S. payments flow into overseas, about 80% of $100 notes dominate international holdings as a result of their excessive worth and portability.
The greenback is concerned in roughly 40-50% of commerce invoicing, over 80% of commerce finance, and about 46-48% of worldwide fee settlements. Analysis has proven that allocating world commerce in response to possession quite than location ends in the US having a commerce surplus, not a deficit.
The greenback stays the undisputed dominant international reserve and transaction forex, concerned within the overwhelming majority of cross-border monetary flows. The entire nonsense about “de-dollarization,” with some nations (like China, Russia, Brazil) rising the usage of different currencies in bilateral commerce agreements, is a distraction. Such a shift is gradual and hasn’t considerably eroded the greenback’s general international share, and can’t till the financial modifications, and that won’t come till AFTER 2032.
Anybody who says the BRICS are displacing the greenback can’t presumably have any expertise in world finance.
The Greenback is the Reserve Foreign money As a result of They Must Promote Their BMWs and Toyotas to American Customers in US$.
I don’t care if BRICS is backed by gold. You can’t go to Chevy to purchase a automotive with BRICS.
The Greenback is backed by the American Client & Navy, Simply As Was Rome
