Opinion: SWIFT kick aimed at Russia, but it also will hit the US dollar | Thomas L. Knapp – Reno Gazette Journal

Thomas L. Knapp| Reno Gazette Journal

This opinion column was submitted by Thomas L. Knapp,director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism.

As part of the Westernresponse to Vladimir Putin's invasion of Ukraine, several regimes acted on Feb.26 to exclude certain Russian banks from the Society for Worldwide Interbank Financial Telecommunication (SWIFT)network. As of March 1, Reuters reports, SWIFT says it's awaiting a list of the sanctioned banks so that it can cut them off.

SWIFT is a messaging service that connects banks worldwide. It's not a bank itself. It's not even, strictly speaking, a payment network. It carries instructions for transfers, but the transfers take place via other networks. It's just one moving part in the world's complex finance and trade system.

As with most such measures, giving Russian banks the boot from SWIFTis certain to hurt the sanctioners along with the sanctioned. In this case, the potential victims with the most to lose arethe issuers and holders of U.S. dollars.

The dollar isn'tthe only currency that gets moved using SWIFT, but it's the de facto "global reserve currency" and thus the most affected by such moves. Nearly everyone accepts the dollar. Nearly everyone wants to have a fat stack of dollars on hand. In particular, global trade in oil has been powered by the "petrodollar" for nearly 50 years.

More: Could sanctions against Russia boomerang back on Americans?

If you want to buy a barrel of Brent crude from most sellers, you need to be able to plunk down (as I write this) 105.46 U.S. dollars. Not 395.72 Saudi riyals. Not 7,983.35 Indian rupees. Not 665.78 Chinese yuan. It's $105.46 or no sale.

What happens when one of the world's largest oil producers is 1) cut off from SWIFT; 2) doesn't want U.S. dollars as much as it used to because other sanctions make those dollarsdifficult to spend; and 3) has trading partners who are watching these sanctions and fear they could be the next victims? Well, this:

A "rupee-rouble trade arrangement may get a push now that Russia is out of SWIFT," reportsThe Times of India.China will presumably likewise increase its yuan-ruble trade with Russia.

The Times of India article reveals that this isn't a sudden development: "India had entered into a rupee-rouble trade arrangement with Russia earlier to shield the two nations from unilateral sanctions from the United States."

What makes the dollar valuable? The same thing that makes anything valuable: People wanting it. Between China and India, more than a quarter of the world's population are in the process of wanting the dollar less than they used to. That, in turn, makes every dollar in your pocket worth less than it once was.

In the short term, the SWIFT kick and other sanctions may hurt Russia more than they hurt you. But the uncontested reign of the U.S. dollar among global currencies seems to be nearing its end, in part because the U.S. government is driving the world away from it with the constant threat of sanctions.

The smart move for Americans? Hold as few dollars as you can get by on. Trade your dollars for gold, silverand cryptocurrency while they're still worth something, to someone, somewhere.

Thomas L. Knapp is director and senior news analyst at the William Lloyd Garrison Center for Libertarian Advocacy Journalism. He lives and works in north central Florida.

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Opinion: SWIFT kick aimed at Russia, but it also will hit the US dollar | Thomas L. Knapp - Reno Gazette Journal