Thunderclap for the Dollar!

The US seizure of Russian assets will have serious repercussions on the international monetary system. It would be a windfall for Bitcoin.

US Congress takes the plunge

The House of Representatives voted this weekend to grant a new military aid package of sixty billion dollars to Ukraine. The Senate still has to weigh in, but with Democrats holding a slim majority, the outcome seems almost certain.

It should be noted that these 60 billion are a loan, not a grant. The bill stipulates that the US president may waive repayment of 50% of this loan. And another 50% after 2026. Or not…

This is a way of ensuring that Kyiv does as it is told. Put another way, Volodymyr Zelensky is indebting his country to continue the sacrifice of an entire generation of Ukrainians to serve the interests of Washington alone.

Another important piece of information, a portion of the “frozen” Russian foreign reserves will be put to use.

To remind, the governments of the United States, Australia, Canada, France, Germany, Italy, Japan, the United Kingdom, and the EU have “frozen” approximately $300 billion belonging to Russia.

These $300 billion represented in 2022 just under half of Russian foreign reserves. Most of these assets are denominated in euros (over 200 billion €), or to be more precise, in European countries’ government debt securities.

Indeed, Russian foreign exchange reserves consisted in June 2021 of 32% euros, 16% dollars, 13% yen, and 21% gold.

Nearly a quarter of the frozen reserves consist of French government debt securities. Germany and Japan follow with 20% each. American debt represents something like 10% of the frozen funds.

Europe drags its feet

It is often said that the confiscation of Russian assets would mark the end of the dollar, but these figures clearly show that it is actually the Old Continent that has the most to lose.

Hence the hesitation of the French-German tango. Seizing Russian foreign reserves would mean exposing oneself to capital flight from all countries that are in the orbit of the BRICS.

The Kremlin’s spokesperson, Dmitry Peskov, warned that Russia will not leave the United States’ decision unanswered, which is akin to shooting itself in the foot. “The seizure of Russian assets undermines the principle of the inviolability of private property… and the property of a state”, he declared.

Such a measure would prompt many investors to withdraw their money from the United States and cause “irreparable damage to the image of the United States”, he added.

In fact, 57% of global foreign exchange reserves are in dollars, in the form of U.S. Treasury securities. Confiscating Russian assets could put an end to this dominance.

It would be the end of the so-called exorbitant privilege. That is the fact that the United States can afford to have a chronically negative trade balance without the dollar exchange rate decreasing.

It will be the same for Europe if it makes the mistake of self-sabotage in this manner. The Euro, in fact, accounts for about 25% of global foreign exchange reserves. It would be a godsend for Bitcoin.

Bitcoin as an international reserve currency

Bitcoin is well positioned to benefit from these geopolitical upheavals. Proof of this is that many nations are accumulating gold relentlessly.

China has imported more than 2,800 tons of gold in the last two years. Knowing that its holdings in U.S. Treasury bonds have melted by 60% in the same period, from $1900 billion to $775 billion.

Unfortunately for gold, it is a poor means of payment. Bitcoin is superior in every way. Sending hundreds of millions of dollars in Bitcoin costs nothing and is done in minutes.

Bitcoin is a currency as well as a payment network. This aspect is crucial in a world where the West is militarizing the SWIFT network.

Even more importantly, Bitcoin exists in finite quantity. Over 95% of BTC has already been mined. In contrast, the quantity of gold remaining in the earth’s crust is immense and we are extracting more and more of it.

Following the recent “Halving”, Bitcoin’s inflation rate is now twice as low as that of gold:

https://t.co/KBtDEbYf4H pic.twitter.com/i9yCbLrCtx

— Nicolas Teterel / PAX (@NTeterel) April 19, 2024

We must face the facts. International relations are at an all-time low. The BRICS countries no longer accept Western monetary dominance and want to trade on equal terms.

The world needs a stateless reserve currency that is uncensorable and even rarer than the barbaric relic. Bitcoin.