Ungrateful Dollar Users Should Be Careful What They Wish For

I’ll confess to being a bit vexed by the idea that the US is expected to sit idly by while a group of increasingly rambunctious economic upstarts and emboldened autocracies agitates for the usurpation of the dollar.

It’s not the agitating that’s problematic. Hold that thought.

One way to describe the dollar is to call it a “club,” or a “project,” as Zoltan Pozsar did last year. Either description is useful. So is the “shared myth” characterization. Whichever you choose, the dollar has been enormously successful. Everyone wants access to the club, wants to participate in the project and generally shares in perpetuating the myth.

If you want to start your own club, launch a competing project or create a new intersubjective reality (to channel Harari), you’re certainly free to do so. But given the strength of the dollar’s network, you’re going to have a hard time. Success, to the extent you have any, will be an incremental, halting affair, and in the interim period, you will need to retain your dollar club membership.

It’s reasonable for nations working on competing projects to assume that their dollar membership won’t be revoked (their access severed) simply out of spite. And because the perception of capricious behavior on the part of the US Treasury could accelerate the pace of de-dollarization, it’s probably counterproductive to arbitrarily boot people from the club anyway.

On the other hand, if you’re tacitly begging to retain your membership while you work on a competing project, it’s reasonable for the US to expect some modicum of fealty. After all, you’re trying to usurp America’s club, and the US is kind enough not only to countenance the effort, but to allow you to keep invoicing and trading and transacting in the dollar while you work to supplant it.

That’s pretty generous, and in exchange, Washington expects that, at a minimum, anyone to whom that leeway and generosity is extended won’t do anything egregious — like start a ground war in Europe, or attempt to influence the US political process by using commodity prices to undermine a sitting president or serve as a conduit for hackers to perpetrate multi-million dollar ransomware attacks.

If you can’t be bothered to be courteous, and you insist not only on plotting against the dollar club you still need, but also on flagrantly insulting the club at regular intervals, then the US Treasury would be forgiven for revoking your membership immediately.

It’s not about stifling competition. If your project is ready for prime time, then what’s the issue? If “BRICS coin” is so formidable and the petroyuan system so promising, then why the furrowed brows and long faces when an autocrat has his G7 claims frozen?

Of course, we know the answer to those questions, and all questions like them. All the other clubs, projects and intersubjective realities are still in the planning stages. Somewhat ironically, Bitcoin is the only one that’s even out of the lab.

In a perfunctory “explainer” piece (mainstream media outlets always publish those whenever there’s a big story to cover), the FT, commenting on OPEC+’s shock output cut, explained that,

Saudi Arabia is… frustrated with US comments last week that it will take “years” for it to refill its Strategic Petroleum Reserve, which was partially drained in 2022 to help keep prices in check after Russia’s full invasion of Ukraine. The US had indicated that while it wanted to stop prices rising too far and would keep pressure on allies such as Saudi Arabia to maintain output, it would also use SPR purchases to put something of a floor under the market. That was supposed to give reassurances to OPEC+ members, who may now feel let down — and are responding by cutting supplies.

Well, excuse the hell out of Washington! It’d be a shame if Saudi Arabia feels “let down.” Whatever will they do? Aramco only made $161 billion+ in profits last year.

The Saudis are currently engaged in a cheeky scheme to chip away at the very system that’s sustained the Kingdom for decades. This is a cartoonish monarchy espousing what I’ll describe as “soft Wahhabism” (quite possibly the worst oxymoron anyone’s ever conjured) which the US allows to lord it over 36 million people. 36 million people who, despite being generally free to go about their daily lives unimpeded, are still at some risk of being decapitated by sulthan swords in public.

Critically, when I say “the US allows,” I don’t mean Washington should be involved in deciding for other nations who should govern. What I mean is that the US has aided, abetted, abided and generally propped up the Saudi monarchy for seven decades, in a Faustian bargain that’s manifested in all manner of blowback, all over the world. There’s no telling whether the monarchy would still be in place today were it not for the US.

Now, in the 2020s, America’s pet royals have decided they’re going to conspire with Washington’s new cold war (common noun) rival in Beijing to upend the global balance of power, while actively coordinating with the US’s old Cold War (proper noun) rival in Moscow to rig oil prices against the White House. All of that at a time when Russia is marauding through Ukraine with China’s tacit approval.

Somehow, in all of this, it’s the US that’s acting capriciously by “weaponizing” the dollar. And it’s the White House who’s being an unreliable parter by not buying massive quantities of crude in order to ensure oil prices don’t fall too much. I’m not sure that makes any sense.

Coming full circle, if you want to retain your access to the dollar and otherwise ensure your club membership remains in good standing during the decade (at least) it’s going to take you to build a minimum viable competing project, it’s incumbent upon you to at least feign a little respect.

If not, then perhaps the US Treasury should cut a few more nations loose. Let “BRICS coin” and the petroyuan sink or swim. When they start drowning, the US can always toss life rafts, but they’ll come with strings — and not just the ones Washington will use to haul everybody back onto the boat.