If the rest of the world remains sufficiently motivated, more can certainly be done to rein in dollar-based sanctions. Indeed, in 2019, former US Treasury secretary Jacob Lew admitted,
the plumbing is being built and tested to work around the United States. Over time as those tools are perfected, if the United States stays on a path where it is seen as going it alone…there will increasingly be alternatives that will chip away at the centrality of the United States.
If the US finds itself no longer at the center of the global financial system, this will bring significant disadvantages for the US regime and US residents. A decline in demand for the dollar would also lead to less demand for US debt. This would put upward pressure on interest rates and thus bring higher debt-payment obligations for the US regime. This would constrain defense spending and the ability of the US to project its power to every corner of the globe. At the same time, central bank efforts to drive interest rates back down would bring a greater need to monetize the debt. The resulting price inflation in either consumer goods or assets would be significant.
The fact none of this will become obvious next week or next month doesn’t mean it will never happen. But the US’s enthusiasm for sanctions means the world is already learning the price of doing business with the United States and with the dollar.
Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for Mises Wire and The Austrian, but read article guidelines first. Ryan has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.