Bank of England Governor: Dollar “Too Dominant” as Reserve Currency, Needs to Be Replaced

During a recent interview on RT America, Peter Schiff said investors should stay away from the dollar, not only because of the looming recession, but because its days as a reserve currency could be numbered.

Is this just hyperbole, or could the US dollar really fall off its throne? America’s enemies would certainly like to see it happen. And increasingly, so would its friends.

Recently, Bank of England Governor Mark Carney said the dollar is “too dominant” and called for its replacement as the reserve currency. He proposed supplanting the dollar with a digital currency. Carney said, digital currency “could dampen the domineering influence of the US dollar on global trade”

The dollar’s influence on global financial conditions could similarly decline if a financial architecture developed around the new [digital currency] and it displaced the dollar’s dominance in credit markets. By reducing the influence of the US on the global financial cycle, this would help reduce the volatility of capital flows to emerging market economies.”

Carney joins a growing chorus of people and nations frustrated with the “domineering influence” of the US dollar. This frustration has been exacerbated by US foreign policy that weaponizes the dollar and uses it to bully other countries.

Because the US controls the world’s reserve currency, it has a great deal of leverage over other countries. The SWIFT payment system provides a platform from which America can exert power and further its foreign policy aims.

SWIFT stands for the Society for Worldwide Interbank Financial Telecommunication. The system enables financial institutions to send and receive information about financial transactions in a secure, standardized environment. Since the dollar is the world reserve currency, SWIFT facilitates the international dollar system.

The US has used the system as a stick before. In 2014 and 2015, it blocked several Russian banks from SWIFT as relations between the two countries deteriorated. Last fall, the US threatened to lock China out of the dollar system if it didn’t follow UN sanctions on North Korea.

Unsurprisingly, other countries don’t appreciate this kind of economic bullying.

We’ve been reporting extensively on efforts by Russia, China and other countries to minimize their exposure to the dollar. Russia and China recently agreed to increase trade using their own national currencies. This is another in a series of moves globally to reduce dependence on the US dollar. Currently, about 10% of trade between Russia and China is conducted in yuan and rubbles. Under the new deal, it will increase to about 50%.

Russia has already developed an alternative payment system to compete with the dollar-based SWIFT system. The Russians are also reportedly considering the development of a gold-backed cryptocurrency. Last year, China launched its much anticipated yuan-denominated oil futures contract.

And it’s not just countries that have rocky relationships with the US that are looking for dollar alternatives. The EU recently announced an alternate payment system that will allow European countries to circumvent US sanctions on Iran is nearly ready.

Carney’s comments indicate the global movement to minimize the power of the dollar and perhaps even replace it as the reserve currency is growing. And it isn’t limited to America’s enemies.

Peter thinks that when everything ultimately shakes out, gold is going to be the reserve currency.

Gold was the reserve before the dollar and it will be the reserve after the dollar. So, people should buy it now. Don’t wait for that to happen because when we remonetize gold, the price will be much, much higher than it is today.”