The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is based in Brussels but with a data centre in Virginia. It allows the United States to surveil cross-border fund flows and then police them in New York, where 95 per cent of the world’s dollar payments are irrevocably settled. The Clearing House Interbank Payments System (CHIPS) is a private club of forty-three financial institutions with a pre-funded account at the US Federal Reserve. They settle $1.8 trillion in claims every day and are subject to US law, allowing the United States to impose billions of dollars in fines on banks that disobey sanctions. Subimperial Power. Clinton Fernandes.
The Atlantic Council analyzed the impact on the US dollar of using central bank digital currencies, CBDCs, in global trading:
130 central banks representing 98% of global GDP are developing CBDCs and policymakers have moved past proof of concept, delivering pilots across a range of jurisdictions.
The USD is 85% of the $7.5 trillion global foreign exchange daily trading turnover. Increased interoperability among national CBDCs will reduce reliance on the USD as an intermediary currency.. which will reduce the use of major reserve currencies in two ways:
Interoperable CBDCs reinforce the growing tendency to use local currencies in bilateral and, eventually, plurilateral cross-border payments.
Reduced demand for USD in trading can trigger parallel decreases in central bank USD holdings. In 2001 the USD accounted for 70% of global reserves. Today, it’s 59%, and Russia and China are blazing the trail.
A shift by importers to local digital currencies decreases the need for central banks to hold USD to cover foreign exchange trading. Central banks provide importers with three months of FX liquidity. As importers shift to CBDCs, central banks must increase their holdings of those local currencies to cover the trade account, reinforcing declining reliance on the US dollar.
The USD’s continued dominance in commerce was driven by the lack of an alternative. Many resent being compelled to support US foreign and security policy as the restrictions on permissible counterparties for US dollar-denominated transactions have increased.
No individual currency needs to replace the US dollar for it to lose its role as the main reserve currency. A gradual shift to multiple alternatives achieves the same result.
Lamenting that the US has no CBDC policy of its own and that the EU’s is inadequate, the authors conclude:
China has proclaimed a “managed privacy” regime where information belonging to businesses and individual users will be protected from each other, but open to the government.. The Cybersecurity Law, Personal Information Protection Law, and Data Security Law prescribe tight control of the collection, transfer, and use of data by companies and private organizations, especially the transfer of data to foreign entities.. The Chinese.. framework.. is not likely to provide a policy template for many other countries.
The conclusion is purest hopium. ECB President, Christine Lagarde, says the EU will not roll out a CBDC for two years.
It’s never one thing
The PBOC, the world’s richest reserve bank, started developing its CBDC template, trading platform and regulations in 2009, with a technical team from the Bank for International Settlements in Basle. Each central bank can choose its domestic CBDC settings and still be 100% interoperable with its international peers.
In Western history, empires have eventually succumbed to overreach and overspending, and finished off by misfortunes common to debtors. Washington currently pays $300 billion interest every month on the national debt and Treasuries are already yielding 5%.
What if the USA loses the Ukraine War and the dollar’s reserve status in 2024, an election year in which Donald Trump is the favorite?
Further to CBDCs, the analytics of Prof Werner (ignored in the financial press because he’s consistently right) is supported by Barry Eichengreen (Berkeley) who writes in an FT piece (12/6/23). He also comments that the failure to regulate banking unfair competitive practices is in contrast to China which is “fining companies for violations of consumer protection and anti-monopoly laws”.
The rollout of CBDCs has been analyzed by the pre-eminent authority on central banks and commercial banks, Dr Richard Werner. He says, as do many experienced bankers, that digital currencies are not needed in any technical sense because they exist already with the transfer and global settlement systems in place.
Dr Werner states outright that the launch of CBDCs is only for the control of the populations..
Further to CBDCs, the analytics of Prof Werner (ignored in the financial press because he’s consistently right) is supported by Barry Eichengreen (Berkeley) who writes in an FT piece (12/6/23). He also comments that the failure to regulate banking unfair competitive practices is in contrast to China which is “fining companies for violations of consumer protection and anti-monopoly laws”.
The rollout of CBDCs has been analyzed by the pre-eminent authority on central banks and commercial banks, Dr Richard Werner. He says, as do many experienced bankers, that digital currencies are not needed in any technical sense because they exist already with the transfer and global settlement systems in place.
Dr Werner states outright that the launch of CBDCs is only for the control of the populations..