Economist Peter St Onge has warned that U.S. dollar weaponization will lead to “soaring inflation, a catastrophic fallen American standard of living, and a U.S. that falls off the world stage.” Commenting on the economist’s warnings, Tesla and Twitter CEO Elon Musk weighed in on de-dollarization.
De-Dollarization Happening Faster Than People Realize, Says Economist
Economist Peter St Onge warned about the dire consequences of weaponizing the U.S. dollar in a video he posted on Twitter Monday. St Onge is a Research Fellow and the Mark A. Kolokotrones Fellow in Economic Freedom at the Heritage Foundation. Before joining the Heritage Foundation, he was a Fellow at the Mises Institute, a Senior Fellow at the Montreal Economic Institute, and an Assistant Professor of International Trade and of Marketing at Taiwan’s Feng Chia University.
Citing a former Morgan Stanley analyst, Stephen Jen, stating that the U.S. dollar has already suffered a “stunning collapse” and is losing its reserve currency status at an “alarming pace,” St Onge stressed:
De-dollarization is happening faster than people realize.
“The dollar share went from 73% in 2001 to 55% in 2021, at which point it fell off a cliff, losing market share 10 times faster,” the economist detailed. “The dollar plunged 8 percentage points in share in a single year to just 47% so we lost about double the entire share of the Chinese yuan. And at that pace, the U.S. dollar would be eclipsed in about 6 years.”
He added: “Separate data from central banks around the world confirm that after decades of complacency, the landscape is shifting.”
Effects of Sanctions on USD
St Onge went on to explain that what severely affected the USD in 2022 was sanctions. He noted that last year, the U.S. froze approximately $300 billion in Russian central bank assets.
“These were Russia’s sovereign dollars. They and everybody else in the world thought of them like gold. This was something we hadn’t even done during the Cold War — during the height of the Cold War with hot proxy wars all over the world — because we were run by adults. Why did Biden do it? The goal was to cause bank panics and crash the Russian economy — perhaps to set off mass unemployment and civil unrest. Of course, it backfired, instead, sending countries around the world in panicked flight from the dollar … and so overnight, the U.S. dollar went from the world’s rock-solid store of value to a political football held hostage to whichever lobbyist or activist caught Joe Biden’s eye this week,” he opined.
The economist concluded:
If the U.S. dollar does continue on this path, we will see soaring inflation, a catastrophic fallen American standard of living, and a U.S. that falls off the world stage — not by choice but by necessity — all of it, 100% our own making.
Numerous individuals have expressed similar warnings. A growing number of countries are also ramping up efforts to shift away from using the U.S. dollar in trade settlements. The Syrian foreign minister said last week that the U.S. imposes sanctions to steal targeted nations’ assets and keep them under its hegemony.
Commenting on St Onge’s video, Tesla and Twitter CEO Elon Musk tweeted:
If you weaponize currency enough times, other countries will stop using it.
Do you agree with Peter St Onge and Elon Musk about the consequences of weaponizing the U.S. dollar? Let us know in the comments section below.