How the United States Killed The Dollar to Punish Russia

The Biden Administration’s decision to freeze Russian central bank reserves has been seen by many as an historical shift, marking the end of the dollar-based global monetary system. With that decision, the U.S. has defaulted on the obligation of a paper currency, and all countries in the world are drawing the lesson accordingly. They will diversify their reserves away from dollar-denominated assets into other currencies and gold. De facto, a new monetary system is coming into being, based on a multiple set of currencies, as deals between Russia and China and Russia and India, but also statements by Saudi Arabia recently indicate.

Writing for the Beirut-based Al-Mayadeen Media Network, Alastair Crooke, Director of Conflicts Forum, asked whether “the Russia-phobic Washington hawks” had not foreseen such “unexpected consequences? Was there some grand strategy behind the seizing of the Russian reserves, beyond visceral malice directed at Russia?

“No, there was just impulse. We know that because both the Fed and the ECB said that they were not consulted on the seizure, or the expulsion of seven Russian banks from the SWIFT financial clearing system, adding that they would have opposed both moves, were they to have been asked.It was self-harm.

“And what an irony! In their zeal to crush the Russian economy, the US hawks inadvertently have opened the way for Russia and China to begin creating a new monetary system, well removed from the US dollar sphere.”

Credit Suisse analyst Zoltan Poszar was among the first ones to call this a “Bretton Woods III” (wrongly assuming that the current floating monetary system is a Bretton Woods II) and he assumed that the new system would be based on gold and commodities. Other economists have joined the discussion, but it is unfortunately tainted by the confusion between a monetary system and a credit system, as such a distinction was established by Lyndon LaRouche.The roadmap towards a new credit system, a real “New Bretton Woods”, was laid out by LaRouche in his 2000 groundbreaking essay On a Basket Of Hard Commodities – Trade Without Currency, which provides a blueprint for a reform of the international monetary system based on an improved version of the 1944 Bretton Woods agreements.

Contrary to the British narrative about the Bretton Woods agreement, adopted by modern apologists of John Maynard Keynes, the gold reserve system established at Bretton Woods was fundamentally the opposite of the British gold standard and, different from the latter, was not conceived of as a global colonial system.