In the 1960s, French Finance Minister Valéry Giscard d’Estaing famously said that issuing the globe’s undisputed reserve currency gave Washington “exorbitant privilege.” In the last week, Joe Biden has proved d’Estaing understated the case quite significantly.
Among the US president’s steps to sanction Vladimir Putin for his brutal invasion of Ukraine is effectively cutting Russia off from much of its currency reserves. Markets were every bit as flummoxed as Putin’s central bank, which planned to use that US$630 billion war chest to stabilize what’s now a junk-rated economy.
Dylan Grice, a UK hedge fund manager at Calderwood Capital, speaks for many when he says he’s “never seen weaponization of money on this scale before.” And then, the kicker: “You only get to play the card once,” Grice warned. “It’s a turning point in monetary history: The end of USD hegemony.”