For the first time in its history, the US total debt has surpassed $31 trillion. This was reported not by a Chinese or Russian newspaper but by the New York Times, the American establishment’s mouthpiece.
It will keep rising because of accumulating interest ($8 billion every five minutes) on its overall debt, as well as interest rate hikes as witnessed in recent months. Add to that the never-ending American wars, now taking on China and Russia as well simultaneously, and it is a recipe for disaster.
The US debt is $7 trillion more than its total GDP. There is no chance that the US will ever be able to repay its debt. Nor, incidentally, does it have the intention to do so. Based on this reality, why do governments continue to lend money to the US and who are the biggest lenders?
Until recently, China held the biggest holdings of US dollars in US treasury bills but today Japan has edged Beijing to the number one position at $1.1996 trillion. China’s holdings stand at $971.8 billion. It has been gradually divesting itself of treasury bonds and purchasing gold instead.
Other countries holding US treasury bonds are: Britain ($644.7 billion), Cayman Islands ($307.3 billion), Luxembourg ($306 billion), Switzerland ($294.9 billion) and Belgium ($287.9 billion). If Cayman Islands, Luxembourg and Switzerland raise eyebrows, they should. These are locales where ill-gotten wealth is stashed away in numbered accounts.
The US is quite happy to take black money and recycle it through its treasury bonds to make it kosher. Aware of the huge benefit of recycling such stolen loot, a number of states in the US have also opened what is referred to as “off-shore accounts”. States like Nevada, New Mexico, Montana and Delaware offer such facilities. Welcome to the United States of Thieves. This is nothing unusual: the entire history of the United States is based on the plunder of others’ wealth, resources and territory.
How can countries free themselves from the stranglehold of the dollar? America is able to maintain its financial dominance globally because oil is traded in US dollars. This was an arrangement the US imposed on Saudi Arabia in the 1970s. It has enabled Washington to print as many dollar bills as it wants (now it does not have to do even that because it simply enters numbers in the computer) and the rest of the world has to foot the bill of US inflation.
In the past, the US used soft power to sell itself to the rest of the world as a land of opportunities where people longed to live the ‘American dream’. Hollywood painted an artificial image of prosperity and freedom. It also had the most powerful military machine in the world and was able to terrorize recalcitrant players into submission.
American military might no longer scares people. Its humiliating defeats in Afghanistan and Iraq testify to its failure. And its mythical freedoms lie exposed in the torture chambers of Bagram and Guantanamo Bay. The only thing that gives the US continued advantage is the dollar. This, however, is now being challenged because of Washington’s weaponization of the greenback.
The list of countries under US sanctions is long and growing. Iran, Afghanistan, Syria, Libya, Venezuela, Russia, China, Cuba and a host of others have been sanctioned. Many have had their assets frozen. Russia’s $300 billion in assets have been frozen by western banks using the pretext of the war in Ukraine. Iran’s assets and oil income are also frozen under totally spurious allegations. Afghanistan’s $10 billion are similarly frozen even though this is causing immense suffering to the Afghan people. Britain, a US ally, refuses to hand over $2 billion worth of gold to Venezuela.
Faced with such bullying, affected countries are working on mechanisms to bypass the US dollar in trade. Two schemes are being worked on. First, countries are resorting to the old-fashioned method of barter trade. Second, they are beginning to trade in each other’s currencies. At the Shanghai Cooperation Organization (SCO) meeting in Samarqand, member-states drew up a roadmap for trading in local currencies.
Russia, China, Iran, Turkey, the Central Asian Republics and a number of other countries have entered into agreements to trade in each other’s currencies. Further, since most of them have been cut off from the SWIFT money transfer system, the Russians and Chinese have set up their own systems. Russian and Iranian banks have already operationalized processing of payment in each other’s currencies.
The real blow will be delivered if Saudi Arabia begins to trade oil in yuan even if does not ditch the dollar completely. Discussions on this proposal have been held and the Saudi regime has indicated its willingness to follow through.
This will weaken the US stranglehold on other countries’ reserves considerably. An alternative reserve currency to the US dollar is imperative if there is to be some semblance of normalcy in the world. During his three-day visit to Saudi Arabia (December 7-9, 2022), Chinese President Xi Jinping discussed with Saudi crown prince Mohammad bin Salman the possibility of trading oil in yuan. While the decision has not been concretized, Saudi Arabia had raised this prospect several years ago and again as recently as March 2022. It was again discussed during Xi’s visit to Saudi Arabia last December.
Should the petro-yuan become operational, it will have far-reaching consequences for US hegemony and global trade.