Exorbitant privilege of US dollars and US trade embargoes

Exorbitant privilege of US dollars and US trade embargoes

by tonytran2015.

(Melbourne, Australia).

Click here for a full, up to date ORIGINAL ARTICLE and to help fighting the stealing of readers’ traffic.

(Blog No. 3xx).

The Total Foreign Exchange Reserve of the World in Q4 of 2021 is USD12,937 billion, 58% of which is in US dollar holding, which amounts to USD7,087 billion (https://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4). The total of US dollars in circulation at that time was around USD 2,214 billion (https://www.federalreserve.gov/releases/h6/current/default.htm). If US government printed and issued an additional 220 billion would the US dollar lose 10% (= 220/2214) of its value or would it lose 2.4% (= 220/(2214+7087))? The answer is somewhere between the two values.


This is the Exorbitant privilege mentioned by Valery Giscard d’Estaing.
So Russia, China and Israel sold off their US dollars in their Exchange Reserves to reduce that privilege held by USA. Their attempts were greatly assisted by the US embargo of trades by non-friendly governments. In the end, foreign countries now share a smaller burden of US inflation due to the smaller amounts of USD kept in their Foreign Exchange Reserves.


From now on USA can expect foreign governments to gradually off-load their USD and US inflation should become higher and higher and should justly be supported more and more by its own economy.



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