COMMENT: Mr. Armstrong, I simply needed to thanks for collaborating in our board assembly. We had come to the identical conclusion that every one of this speak of BRICS and de-dollarization was being promoted by individuals within the conspiracy class, missing any trustworthy expertise in worldwide commerce. Earlier than the assembly, we known as one, and our Chairman listened. They may not reply any actual financial query. The claims that that is the top of greenback hegemony solely uncovered their lack of knowledge.
Trump’s tariffs, Biden’s sanctions, and the freezing of Russian property had been all speculated to kill the greenback as Russia, China, India, Brazil, and South Africa had been to assemble parallel monetary techniques as if they might not promote to the US. Then there was the point out of backing by gold. Our chairman was very impressed that you can reply each query. You pointed us in the fitting course with widespread sense and your real-world expertise.
Thanks as soon as once more. As you stated, U.S. is about one third of your entire world client market, and world monetary transactions to IPO are predominantly in {dollars}. Our Chairman might be at your WEC personally this time.
SFD
ANSWER: Thanks. As a result of that is such an vital matter and I shouldn’t have the time to attend each board assembly internationally, I believed it greatest that I lay out the gist of our discussions. Your organization is within the world enterprise, and it’s pathetic how nearly all of these individuals preach the identical nonsense with out understanding world commerce. The US greenback’s dominance in worldwide finance is obvious regardless of BRICS, however its share varies throughout completely different areas. Earlier than World Warfare II, international locations issued their debt in British kilos as a way to promote it in London. Immediately they challenge in {dollars}.
U.S. Multinational Dominance: U.S. corporations earn huge income abroad. That is the PRIMARY purpose why these analysts don’t perceive world commerce. Apple, Microsoft, and Pfizer all generate greater than 50% of income overseas. In 2022, U.S. multinationals earned $1.6 trillion from overseas associates (BEA data). Then there’s the Mental Property (IP) and Companies comparable to our agency with places of work world wide. The US is a web exporter of IP, royalties, and high-value providers (e.g., Google’s advert income overseas).
The US historically runs a items deficit (manufacturing) of $1 trillion/12 months however a providers surplus of $300 billion if we have a look at the accounting based mostly on the possession of corporations relatively than location, US abroad affiliate gross sales ($6 trillion/12 months) dwarf overseas affiliate gross sales within the US ($4.5 trillion/12 months). Now throw within the web IP receipts ($100 billion surplus), the U.S. possible reveals a web Dealer Surplus on an possession foundation.
When mixed with providers, IP, and abroad income, the general stability shifts to a surplus. The US advantages disproportionately from globalized manufacturing as a result of its companies seize worth via branding, R&D, and IP—parts obscured by conventional commerce metrics. This highlights why commerce deficits alone are an incomplete measure of financial well being. Trying on the ownership-based accounting higher displays the place worth is captured in world provide chains. I’ve argued this in Washington, however it goes in a single ear and out the opposite.
World Commerce Invoicing & Settlement (Main Focus):
Roughly 40-50% of all world commerce (exports) is invoiced in US {dollars}. This implies the costs of products traded internationally are set in {dollars}, whatever the international locations concerned. Over 80% of worldwide commerce finance (letters of credit score, and so on.) is performed in {dollars}!!!!! Round 88% of worldwide overseas alternate (FX) transactions contain the US greenback on one facet (in accordance with the BIS Triennial Survey). This underpins commerce settlements and makes the entire silly argument of de-dollarization laughable, for they’re mixing geopolitical with economics.
SWIFT knowledge (fee messages) accounts for roughly 46-48% of worldwide fee messages (by worth) which can be denominated in USD (as of mid-2024). It is a key indicator of precise settlement foreign money. Provided that the newest client spend on the finish of 2025 quantities to $55.5 trillion, of which the American client is now $17.9 trillion, US client spending accounts for 32.3% of your entire world! So, will BRICS displace the greenback? Come on. They stated the identical BS in regards to the Euro. The USA is the LEAST socialist nation, and that above all accounts for its Dominant Share of the world financial system. Regardless of having solely about 4% of the world’s inhabitants, the U.S. constantly accounts for practically one-third of worldwide client spending. This underscores the immense dimension and significance of the U.S. client market to the worldwide financial system and thus the greenback.
The greenback’s dominance does impression client spending globally as a result of many items that buyers purchase regionally are imported in different international locations. If these imports had been invoiced and paid for in {dollars}, fluctuations within the greenback’s worth may have an effect on native costs (inflation/buying energy). Because of this your key commodities like oil, metals, and grains are predominantly priced in {dollars}. Adjustments within the greenback have an effect on the price of power and uncooked supplies globally, impacting manufacturing prices and finally client costs for an unlimited array of products. When the US is about 1/third of the world’s client spending and about 50% of all world commerce, that’s the reason they’re priced in US {dollars} relatively than the pesos.
The subsequent HUGE space these one-issue analysts ignore is the Debt & Monetary Markets. Nations and companies borrowing in {dollars} face reimbursement prices affected by greenback power, influencing their economies and doubtlessly client spending energy inside these international locations. This has usually been one space that I get known as into lots. Forex Pegs/Reserves have been a vital challenge over time. Many international locations handle their currencies relative to the greenback or maintain important greenback reserves, influencing their home financial coverage and financial stability. This consists of Overseas Trade Reserves. The greenback constitutes about 59% of allotted world overseas alternate reserves held by central banks (IMF COFER knowledge Q1 2024).
Roughly 75-80% of rising market (EM) exterior sovereign bonds are denominated in US {dollars}. For company EM bonds, the share is barely decrease, round 60-70%. As I identified, earlier than World Warfare II, EMs would challenge their debt in British kilos as a result of that was the place there was a market to promote their debt. Immediately, the pound has been changed with {dollars}, and the FINANCIAL CAPITAL OF THE WORLD is now New York – not London or Paris.
Of the Sovereign Debt points globally (Authorities Issuance), that works out to be 75-80% USD-denominated (e.g., IMF, BIS, and J.P. Morgan EMBI Index knowledge). For instance, as of 2023, over 75% of EM authorities bonds held by overseas traders had been in USD. Flip to the company world. There we see 60-70% USD-denominated company debt points (e.g., Financial institution for Worldwide Settlements knowledge). That is even greater in sectors like commodities or multinationals.
New York Metropolis is unequivocally the world’s main world monetary heart, and its banks play a dominant function in key points of worldwide banking. This ensures the greenback’s function in world transactions. The overwhelming majority of worldwide commerce and finance is performed in USD. NYC banks are on the coronary heart of that system. On a clearing foundation alone, the Clearing Home Interbank Funds System (CHIPS) in NYC clears roughly $1.5 trillion day by day in cross-border USD funds. That represents an enormous share of worldwide USD flows.
Then there’s the Correspondent Banking community. Main NYC banks act as correspondent banks for 1000’s of banks worldwide, facilitating their worldwide USD transactions.
Funding Banking (Capital Markets) takes place within the coronary heart of the NYC-based banks (Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup) and this constantly dominates world points of Mergers & Acquisitions, Fairness and Debt underwriting (IPOs, bond issuances), and Gross sales & Buying and selling (particularly of US Treasuries, the world’s most profound and most vital bond market). Even when we have a look at the worldwide funding banking charge income, you will see that that greater than 50% takes place in New York Metropolis.
Europe and Britain, together with India and Switzerland, cancelled their foreign money. The $500 and $1,000 Canadian banknotes had been withdrawn from circulation and are not authorized tender as of January 1, 2021. Nonetheless, they will nonetheless be redeemed at banks or the Financial institution of Canada for his or her face worth, they usually might maintain further worth for collectors. Trump has proposed bringing again the $500 invoice. But, whereas Roosevelt stopped issuing high-denomination payments, they’re nonetheless legitimate. It is a MAJOR challenge that the greenback stays the reserve foreign money world wide – it’s TRUSTED!!!!!! Whereas 60% of all U.S. payments flow into overseas, about 80% of $100 notes dominate overseas holdings on account of their excessive worth and portability.
The greenback is concerned in roughly 40-50% of commerce invoicing, over 80% of commerce finance, and about 46-48% of worldwide fee settlements. Analysis has proven that allocating world commerce in accordance with possession relatively than location ends in the US having a commerce surplus, not a deficit.
The greenback stays the undisputed dominant world reserve and transaction foreign money, concerned within the overwhelming majority of cross-border monetary flows. All the nonsense about “de-dollarization,” with some international locations (like China, Russia, Brazil) growing using different currencies in bilateral commerce agreements, is a distraction. Such a shift is gradual and hasn’t considerably eroded the greenback’s general world share, and can’t till the financial adjustments, and that won’t come till AFTER 2032.
Anybody who says the BRICS are displacing the greenback can’t probably have any expertise in world finance.
The Greenback is the Reserve Forex As a result of They Should Promote Their BMWs and Toyotas to American Shoppers in US$.
I don’t care if BRICS is backed by gold. You can’t go to Chevy to purchase a automobile with BRICS.
The Greenback is backed by the American Shopper & Navy, Simply As Was Rome
