Tags: US | foreign | dollar | trade

Using the Dollar As an Enforcement Weapon Is Dangerous

Monday, 09 June 2014 08:11 AM Current | Bio | Archive

It's a globalized world. The safety and stability of the U.S. economy and security are deeply intertwined and dependent on maintaining well-being and safekeeping.

What would happen to the U.S. financial markets if foreign countries started threatening wholesale indictment of U.S. banks and companies for violating their tax laws or foreign policies?

How about having foreign countries charging U.S. financial interests with criminal behavior because the U.S. financial interests are not following the dictates of the foreign policy directives?

These are obviously bad things on many levels. Yet, this is what the United States is doing to our closest of allies as well as our enemies.

The prosecution of BNP Paribas has raised these concerns to such a level that the French government declared that the fine on BNP Paribas threatens a planned transatlantic trade partnership with the United States.

Under investigation are also France's Credit Agricole, Societe Generale, Germany's Deutsche Bank and Italy's Unicredit, as well as Israeli banks. Basically, all of America's allies. Apparently, not under investigation are any Islamic banks.

Where does the United States get the power to impose its will unilaterally?

Financial Times columnist Felix Simon wrote:

"If the U.S. takes an aversion of you, it can cut you off from the international financial system. No other country can do this, but the U.S. controls the dollar and the dollar is the international unit of account. Pretty much any dollar transaction — even between two non-US entities — will go through New York City at some point, where it comes under the jurisdiction of the U.S. authorities."

Simon explained that the United States is using its banking laws "not to make its financial system safer, nor protect its own citizens from predatory financial behavior, but rather to advance foreign policy and national security objectives."

What is particularly galling about this is that the United States imposes one set of standards for everyone else to follow, but doesn't apply them to U.S. concerns with any sort of rigor if at all.

As Simon stated, "The hegemon does whatever it wants, for its own inscrutable reasons, and does not enjoy being questioned about its decisions."

For all those outside of the United States, but who have substantial U.S. dollar business dealings, the threat of being cut off from having their dollar transactions processed brings even the biggest of financial institutions to their knees. The result is that they beg U.S. prosecutors for forgiveness and pay multi-million or multi-billion dollar fines.

Of course, criminal behavior should be punished. But for the United States to make criminal the activities of foreign financial institutions because of its own unfathomable domestic political, tax, or foreign policy demands sets up the United States for reprisals.

For those paying close attention, the reaction around the world is becoming noticeable. International banks are ending doing business with Americans; foreign money managers are slowing their investing in the U.S. markets; increasingly trade transactions are being done in foreign currencies like the yuan; virtual currencies are gaining wider acceptance; and increasingly American economic and security interests are running into hurdles or barriers.

The United States is losing the world's respect both financially and politically.

Then again, so is the U.S. dollar.

And that is dangerous.

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It's a globalized world. The safety and stability of the U.S. economy and security are deeply intertwined and dependent on maintaining well-being and safekeeping.
US, foreign, dollar, trade
Monday, 09 June 2014 08:11 AM
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