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The Greenback Chokehold

The Greenback Chokehold

The world cannot accept the US as a global “economic policeman,” declared France’s foreign minister, commenting on the Trump administration’s decision to withdraw from the Iran deal and reimpose harsh US sanctions on any companies that do business with Tehran.


US power may not be what it once was, as Willis wrote last week, but US dominance of the global financial system is one area where Washington still rules the roost. Some two-thirds of international trade and lending is done in dollars, according to the Bank for International Settlements. A similar percentage of governments’ global reserves are held in greenbacks.

Now, if you want to do business in dollars without shuttling them around in briefcases or keeping them stuffed in your mattress, you’ll have to deal at some stage with US correspondent banks. And that’s where Washington can put you over a barrel, by threatening to cut you off from the US financial system if you violate sanctions. That’s precisely what the Iran sanctions do.

European leaders have proposed legislation to deflect the impact of US sanctions, but few CEOs are likely to bet their firms on that. Exclusion from the US financial system would have an immediate and crippling impact, while lawyering it all out could take years. If the US wants to play hardball, then it’s a world of hurt for European companies, which are all deeply entwined with the US financial system.

Over the longer term, of course, alternatives to the dollar-based international financial structure may gain momentum. The Euro accounts for about a fifth of global reserves and lending. But breaking the bond with the US would be extremely costly today.

Beijing, for its part, is keen to boost the renminbi as an international reserve and transactions currency, but only a fraction of non-Chinese trade is RMB-denominated and international RMB reserves remain miniscule. Various governments are also experimenting with sovereign cryptocurrencies as a way to get around US financial system and sanctions, but these bids are in their infancy.

For now, whether the French (or others) can accept it or not, the dollar’s dominance still gives Washington tremendous leverage over friends and foes alike.

A century after the rise and destruction of Tulsa's Greenwood neighborhood, Greenwood Rising is turning the site of a tragedy into a vibrant community hub, supported by a $1 million grant from Bank of America.

Greenwood, or Black Wall Street, was a thriving community of Black-owned businesses until the race-fueled massacre of 1921 that killed hundreds of Black residents and wiped out the neighborhood's homes and businesses. Nearing the 100th anniversary of this tragedy, focused activity in the neighborhood—including a history center—is bringing to life the spirit of Black Wall Street.

The most ambitious global vaccination drive in history is in motion. Over the past three months, more than 213 million COVID-19 shots have been administered across 95 countries, and the vaccination rate is slowly increasing. At the current rate, around 6.11 million doses are being administered daily.

It's a rare bit of hopeful news after 15 months of collective misery. So where do things stand at the moment, and what's keeping the world from getting to herd immunity faster?

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Ian Bremmer shares his perspective on global politics this week:

With protests growing, where does that leave the Myanmar coup?

Well, certainly no feeling on the part of the military that they need to back down under either domestic or international pressure. There's been relatively limited violence, thankfully so far. A few protesters have been killed. They've used tear gas, they've used water cannons, but much less of a crackdown than certainly they're capable of or that we've seen from the Myanmar military historically. That, of course, gives the protesters on the ground more incentive to think that they have success, and they can continue.

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Reducing carbon emissions is good for the planet and good for your lungs, but there's one group of countries that might not be so keen on green: those that rely heavily on oil and gas exports to run their economies. As the rest of the world gets closer to "Net Zero" in the coming decades, these petrostates will be in big trouble unless they diversify their economies — fast. So, how vulnerable are the world's top oil and gas producers to a low-carbon future? We look at how the treasuries of the 20 most hydrocarbon-dependent nations will fare over the next two decades under what the Carbon Tracker Initiative refers to as a scenario in which global demand for oil and gas will be much lower than today.

US to release Khashoggi report: The Biden administration's intel chief is expected to release on Thursday a report on the murder of Saudi dissident journalist — and US resident — Jamal Khashoggi. In line with previously reported findings, the assessment will say that Crown Prince Mohamed bin Salman was involved in the plot to kill and dismember Khashoggi at the Saudi consulate in Istanbul in 2018. Aside from a sprinkling of new details, we don't expect much from the report itself, but we are keen to see how it shapes US-Saudi relations under Joe Biden, who has promised to take a harder line with Riyadh over human rights and security issues than his predecessor did. Part of that new approach is that the US president will no longer speak directly to the Crown Prince himself as Trump did — from now on, only his dad, King Salman, gets calls from the White House.

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