Trump Between The Dollar And Bitcoin

Is Donald Trump’s blackmail to force the world to trade in dollars incompatible with his promise to create a strategic reserve of bitcoins?

Misunderstanding?

Donald Trump’s threats have caused a stir in recent days. The next president of the United States warned in a tweet that countries refusing to trade in dollars should expect punitive tariffs:

“The idea that BRICS countries could distance themselves from the dollar while we stand idly by is over. We demand that these countries commit to not creating a new currency, nor to supporting another currency to replace the dollar, otherwise they will be subject to a 100% customs duty. This means they can say goodbye to their sales in the large American economy. They better find another pigeon! There is no chance that BRICS will replace the US dollar in international trade. Any country that tries will have to say goodbye to America.”

For some, these statements contrast with his promise to create a strategic reserve of bitcoins. This is the case for Professor Jeremy Siegel, who sees a glaring antinomy:

“I find D. Trump’s tweet very curious, as I believe the greatest threat to the dollar as a reserve currency is bitcoin, of which Donald Trump is a strong supporter. So it seems a bit strange to prevent them from using an alternative reserve currency when many countries consider bitcoin to be such.”

JUST IN: University of Pennsylvania professor says “the biggest threat to the dollar being used as a as a reserve currency is #Bitcoin” and “being talked about by many countries in the world as their alternative currency.” pic.twitter.com/7LJB25ZKfH

— Simply Bitcoin (@SimplyBitcoinTV) December 2, 2024

To gain clarity, it is necessary to explain why the United States is so keen for global trade to be conducted in their currency. The status of the dollar as an international currency is so important that Washington would apparently be willing to isolate itself from BRICS.

[Our article: “Bitcoin – The geopolitical masterstroke of the United States”]

The exorbitant privilege

Donald Trump was not always aware of the colossal advantages offered by the dollar. He still believed in 2016 that the end of the gold standard had weakened the United States. “We had a very, very strong country because it was based on the gold standard”, he declared on a local channel in New Hampshire.

This naivety has obviously faded with the contact of the Oval Office advisors who explained to him that the petrodollar system is the cornerstone of the empire.

It all began in 1974 when Henry Kissinger forced OPEC countries to sell their oil exclusively in dollars. Oil being already indispensable to any advanced industrial economy, the dollar remained the pivot currency despite the end of the Gold Standard (1971).

The greenback established itself as the international currency par excellence, and the acceleration of globalization further solidified its hegemony. This means that international reserves of dollars increased rapidly.

These reserves today amount to nearly 7 trillion dollars. That is as much money as exporting nations do not convert into their own currency. It follows the famous privilege that the United States is the only nation that can afford to maintain a chronically trade deficit without its currency collapsing.

The other advantage is the ease of borrowing since foreign central banks place their reserves in US Treasury bonds (to earn interest).

Fifty years later, the gargantuan debt of the US government accounts for more than 36% of the world’s public debt. Knowing that Americans represent only 4% of the world’s population…

We must save the greenback

Light being shed on the exorbitant privilege of Americans, let’s quickly examine the balance of power before returning to bitcoin.

The BRICS represent nearly half of the world’s population (46%), compared to just under 10% for the G7 (United States, Canada, Japan, United Kingdom, Germany, France, and Italy). The same trend applies to GDP:

Ok, look.

BRICS is bigger than G7 in PPP. And so it is not obvious that the US can win a tariff showdown with China given today’s manufacturing base. So why not start with deregulation and reindustrialization?

Build the capacity to build first. pic.twitter.com/NpgVskf5Wt

— Balaji (@balajis) December 1, 2024

Among other metrics, the club is responsible for about 25% of global exports. It produces 43% of oil and owns 44% of global reserves. It’s 35.5% and 53% for gas, respectively.

Another very interesting fact is that China is the largest trading partner for more than 120 countries. Moreover, Beijing has a monopoly on the extraction and processing of rare earth elements.

If the extraction of minerals occurs in various locations around the globe (for example: 50% of nickel in Indonesia, nearly 75% of cobalt in the DRC, over 75% of lithium in Australia and Chile), China controls more than half of the global refining of aluminum, lithium, and cobalt. It’s even 90% for rare earths and manganese, and even 100% for graphite.

In summary, even though the West possesses significant leverage through semiconductor technology, BRICS have means to retaliate. In response to Donald Trump’s customs threat, the Russian embassy in Ethiopia even tweeted:

“Go ahead, the resulting price increase will weigh heavily on the purchasing power of Americans. America first?”.

The Plan B

BRICS are very worried since the “freeze” of several hundred billion belonging to Russia. Billions that, by the way, are mainly composed of euros, not dollars…

Therefore, it is the old continent that will be in the crosshairs if this money is not returned. It would be the final blow, after already cutting off Russian gas to buy that of the United States, which is much more expensive.

China and other countries like Saudi Arabia fear they will be next on the list. The Middle Empire nonetheless holds 800 billion in US Treasury bonds.

The mistrust towards the dollar is such that the Wall Street Journal revealed in 2023 that Washington was actively seeking guarantees that Saudi Arabia would sell its oil in US dollars – and not in Chinese yuan – as a condition for any normalization agreement with Israel.

But it is hard to see how BRICS could backtrack. Sooner or later, China will purchase Saudi oil in yuan. Faced with dedollarization, the United States will have no choice but to reduce their trade deficit, which requires an increase in customs duties.

In this scenario, the world will need a new pivot currency, which is not simple. However, bitcoin is increasingly appearing as an obvious choice. Its advantages are numerous.

It is stateless. Using bitcoin as an international reserve currency would allow all nations to trade on equal footing. End of the exorbitant privilege.

Bitcoin is also a currency as well as a decentralized payment network, both in one. It’s impossible to confiscate the reserves of a nation that would not align with your foreign policy.

Finally, its monetary supply is capped at 21 million units. This technological breakthrough makes it the best store of value in the history of humanity.

Bitcoin is inevitable. Creating a reserve of bitcoins before anyone else would allow the United States to save face. Donald Trump himself said he would repay America’s debts to foreign countries in bitcoins.

Don’t miss our article: “American miners rise up to counter dedollarization”.