COMMENT: Mr. Armstrong, I simply needed to thanks for collaborating in our board assembly. We had come to the identical conclusion that each one of this speak of BRICS and de-dollarization was being promoted by folks within the conspiracy class, missing any trustworthy expertise in worldwide commerce. Earlier than the assembly, we referred to as one, and our Chairman listened. They might 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 presupposed to kill the greenback as Russia, China, India, Brazil, and South Africa had been to assemble parallel monetary programs as if they might now not promote to america. Then there was the point out of backing by gold. Our chairman was very impressed that you might reply each query. You pointed us in the proper route with frequent sense and your real-world expertise.
Thanks as soon as once more. As you mentioned, us is about one third of all the world shopper market, and world monetary transactions to IPO are predominantly in {dollars}. Our Chairman shall be at your WEC personally this time.
SFD
ANSWER: Thanks. As a result of that is such an vital subject and I should not have the time to attend each board assembly internationally, I believed it finest 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 folks 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 Conflict II, international locations issued their debt in British kilos as a way to promote it in London.
U.S. Multinational Dominance: U.S. firms earn huge earnings abroad. That is the PRIMARY motive 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 international associates (BEA information). Then there may be the Mental Property (IP) and Companies resembling our agency with workplaces 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 firms somewhat than location, US abroad affiliate gross sales ($6 trillion/12 months) dwarf international affiliate gross sales within the US ($4.5 trillion/12 months). Now throw within the web IP receipts ($100 billion surplus), the U.S. seemingly exhibits a web Dealer Surplus on an possession foundation.
When mixed with providers, IP, and abroad earnings, the general stability shifts to a surplus. The US advantages disproportionately from globalized manufacturing as a result of its companies seize worth by way of branding, R&D, and IP—components 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 forth.) is carried out in {dollars}!!!!! Round 88% of worldwide international alternate (FX) transactions contain the US greenback on one aspect (in line 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 information (cost messages) accounts for roughly 46-48% of worldwide cost messages (by worth) which are denominated in USD (as of mid-2024). This can be a key indicator of precise settlement foreign money. On condition that the most recent shopper spend on the finish of 2025 quantities to $55.5 trillion, of which the American shopper is now $17.9 trillion, US shopper spending accounts for 32.3% of all the world! So, will BRICS displace the greenback? Come on. They mentioned the identical BS in regards to the Euro. America 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. persistently accounts for almost one-third of worldwide shopper spending. This underscores the immense dimension and significance of the U.S. shopper market to the worldwide financial system and thus the greenback.
The greenback’s dominance does influence shopper spending globally as a result of many items that customers 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 might 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 vitality and uncooked supplies globally, impacting manufacturing prices and in the end shopper costs for an unlimited array of products. When the US is about 1/third of the world’s shopper spending and about 50% of all world commerce, that’s the reason they’re priced in US {dollars} somewhat than the pesos.
The subsequent HUGE space these one-issue analysts ignore is the Debt & Monetary Markets. Nations and firms borrowing in {dollars} face compensation prices affected by greenback power, influencing their economies and probably shopper spending energy inside these international locations. This has usually been one space that I get referred to as into lots. Foreign money Pegs/Reserves have been a crucial situation 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 international alternate reserves held by central banks (IMF COFER information 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 Conflict II, EMs would situation their debt in British kilos as a result of that was the place there was a market to promote their debt. At the moment, 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 information). For instance, as of 2023, over 75% of EM authorities bonds held by international 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 information). 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 features of worldwide banking. This ensures the greenback’s function in world transactions. The overwhelming majority of worldwide commerce and finance is carried out 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 a large share of worldwide USD flows.
Then there may be the Correspondent Banking community. Main NYC banks act as correspondent banks for hundreds 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 persistently dominates world features 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 discover 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 now not authorized tender as of January 1, 2021. Nevertheless, they will nonetheless be redeemed at banks or the Financial institution of Canada for his or her face worth, they usually might maintain extra worth for collectors. Trump has proposed bringing again the $500 invoice. But, whereas Roosevelt stopped issuing high-denomination payments, they’re nonetheless legitimate. This can be a MAJOR situation 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 international holdings as a consequence 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 cost settlements. Analysis has proven that allocating world commerce in line with possession somewhat 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 the usage of different currencies in bilateral commerce agreements, is a distraction. Such a shift is gradual and hasn’t considerably eroded the greenback’s total world share, and can’t till the financial modifications, and that won’t come till AFTER 2032.
Anybody who says the BRICS are displacing the greenback can’t presumably have any expertise in world finance.
