Negative impact of US Sanctions

 Negative impact of US Sanctions 

The punitive sanctions that the United States imposed on Russia were designed to crush its economy. That type of sanctions has never been applied to any rival before. Now Russia has been cut off from the banking system, prohibited dollar transactions, isolated Russia’s central bank, etc. Russia cannot seek relief from the IMF or the World Bank as these are also US controlled institutions.

No one completely understood the impact of these sanctions back on the United States itself. But regardless of the reverse impact on the United States themselves, they celebrate the punishment they have applied to Russia. Today, there are a few countries in the $2 trillion or $3 trillion economy considering turning away from the dollar as the dominant international currency. 

No other currency comes to mind to replace the almighty dollar, but this movement in the minds of major economies to replace the dollar has begun. That's bad news for U.S. politicians and economists who hate to lose the power of the almighty dollar.

In1944, at the Bretten Woods conference (post WW2) Great Briton lost that position of being the epicenter of the financial world with its currency ruling the world. The Brit’s did not like it, they had no choice. The US dollar began to rule and has ruled for 75 years.

Events such as the war between Ukraine and Russia had never occurred before when the United States and NATO were about to confront Russia. Worse still, the United States wanted to punish Russia with exemplary penalties. The bureaucrats and politicians who have advised the President of the United States have never thought of the inverse effect of sanctions. 

Yes, now Russia is running around asking for currency help, selling its commodity - Oil on the cheap, but since Russia is a closed fortress economy, it will find ways to survive. My concern is the impact of the complete shutdown of Russia on the rest of the world. 

China is in the grip of Covid shutdowns these days, otherwise in the past, they have been pushing for RMB (Yuan) as an alternative currency. They have the largest economy, $3 trillion in cash reserves and influential trade with the United States, which they quietly use to advance their agenda. 

Does the RMB become another currency? ...... No, sir, not yet, but the United States has involuntarily started the ball rolling. Other countries with significant and growing economies that are pressured to support the United States will always raise the issue. Other alternatives are digital currency and cryptocurrency. 

There will probably be another Bretten Woods conference where not one, but three or four currencies will vie to dominate in place of the mighty US dollar. The alternative is digital currencies.

The net result will be to prevent any currency from restricting international banking and freezing assets, etc. In other words, sanctions will be behind us. The US will be the net loser.

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