Economy, Business And Markets

Financial War Could Trigger Dollar Collapse

Financial War Could Trigger Dollar CollapseFinancial War Could Trigger Dollar Collapse

As the US is waging a dangerous financial war with Iran, some experts are warning that the US could not win such a battle and that this could ultimately destroy the dollar as we know it.

Money Morning website reports the dollar maintains its value as a reserve currency because global demand keeps it that way. As long as the world needs dollars to settle international transactions, it's only going to continue to stay strong against the world's currencies.

But the US Treasury sees the dollar as more than a means to settle international transactions. It's also a weapon. As a weapon, the dollar can be used to destabilize other nations, the report says.

The report argues that the financial war being waged by the United States is actually backfiring and world financial war is turning against the dollar.

Treasury official David Cohen said in 2013 that the US is seeking "to cause depreciation of the rial and make it unusable in international commerce."

After freezing Iran's account at the US Federal Reserve in 2012 and pressuring Belgium to prohibit Iranian transactions in the international SWIFT payments system, the Iranian economy was hurt. Without access to international payments systems, Iran struggled to receive dollars for its oil exports.

However, in locking Iran out of the dollar payments system, the US had to face the ugly reality underlying this financial war: The dollar is not an effective weapon as the US Treasury thinks, the website noted.

Instead the US drove Iran into the arms of an international triumvirate seeking to dismantle dollar hegemony. Iran turned to India, China and Russia to circumvent the international dollar payments system.

India swapped gold for oil with Iran. Iran then used this gold to buy food and manufactured goods from China and Russia, in their efforts to stockpile the yellow metal.

The ease with which these four nations can settle international transactions without the dollar reveals a dramatic development in the global financial order.

The dollar is not the only weapon in financial war. And its potency is slowly being eroded by gold.

"The United States had wanted to drive Iran out of the dollar payments system," Jim Rickards, the Financial Threat and Asymmetric Warfare Advisor for both the Pentagon and CIA wrote in his 2014 book The Death of Money. "But in a case of 'be careful what you wish for,' an alternative non-dollar-based payment system is now taking shape in Asia, and gold has proved to be an effective financial weapon on its own."

Iran is simply a small part of much more far-ranging global effort to undermine the dollar's role on the international stage. "What is starting with Iran portends a financial collapse of a magnitude we've never seen before–one that has the potential to wipe out $100 trillion in wealth," the report concluded.