A mistral helicopter landing ship – at the centre of the bust up between France and the USA (source)
When we reported late last year that The Obama Administration in the USA was playing with fire by imposing fines on British (and German) banks because they handled transactions with Iran and other nations against which the USA has imposed sanctions, we did not expect an arrogant egomaniac like Barack Hussein Obama to take our warning on board. It might have been wise if Obama had listened to some of the international financiers and diplomats who were trying to remind the ego – in Chief he is president of the USA, not the entire world, but hey Obama knows that the colour of a man’s skin is the only measure of intelligence so I guess his critics just weren’t black enough for him to believe they knew what they were talking about.
The backlash began slowly enough, France, Britain, Germany and other European nations, along with governments in Africa, Asia and South America began making trade deals with Russia and China to conduct business in the currency of the vendor nation and undermine the status of the US$ as the global reserve currency.
It would be totally out of character for Obama to react to what is actually happening, the man is a solipsist and seems to believe he can bring about a situation by wishing it so. Thus the US compunded its error of believing the world must do its president’s bidding by imposing a multi-billion US dollar fine on France’s biggest bank, BNP, because the french government proceeded with delivery of a warship to Russia after the USA had declared military equipment trades with The Kremlin illegal after Putin made the Americans look like idiots over Ukraine. The French government took exception to this (well the ship was already built and warships don’t come cheap). In an interview given to French magazine ‘Investir’, the governor of the French National Bank Christian Noyer and member of the ECB’s governing board, made this rather gobsmacking response to a question:
Q. Doesn’t the role of the dollar as an international currency create systemic risk?
Noyer: Beyond [the BNP] case, increased legal risks from the application of U.S. rules to all dollar transactions around the world will encourage a diversification from the dollar. The fining ofBNP Paribas was the occasion for many observers to remember that there have been a number of sanctions (against non US banks) and that there would certainly be others in the future.
A movement to diversify the currencies used in international trade is inevitable. Trade between Europe and China does not need to use the dollar and may be read and fully paid in euros or renminbi. Moves towards towards a multi – currency trading system is the natural monetary policy, since there are several major economic and monetary powerful ensembles. China has decided to develop the renminbi as a settlement currency. The Bank of France was behind the popular ECB-PBOC swap and we have just concluded a memorandum on the creation of a system of offshore renminbi clearing in Paris.
We have very strong cooperation with the PBOC in this field. But these changes take time. We must not forget that it took decades after the United States became the world’s largest economy for the dollar to replace the British pound as the first international currency. But the phenomenon of U.S. commercial law expanding to all USD-denominated transactions around the world can have an accelerating effect.
In other words, the head of the French central bank, and ECB member, Christian Noyer, just issued a direct threat to the world’s reserve currency, the US Dollar, and the Obama administration.
In a nutshell, by attempting bring France to heel after the French honoured contractual obligations taken on long before there was any threat of sanctions against Russia by completing the delivery of a Mistral amphibious warship, the US decided it had the right to punish France by imposing a large fine on BNP, its leading bank. Really the fine represented blackmail by the Americans ( Putin revealed the BNP penalty was a used as a carrot to pressurize France into scrapping the Mistral transaction at a very late stage: had Hollande scrapped the deal, the French were promised BNP would face a far lower fine, if any). The blackmail attempt backfired catastrophically for America when as a result, the head of the French central bank spells it out that not only is the Dollar’s reserve currency status not immutable, but the international community will be even more eager to avoid USD-transactions in order to escape the tentacles of America’s global trade police.
The biggest irony is that in “punishing” France for dealing with Russia, the key player in the Eurasian alliance of Russia, China and Iran, the US merely gave France (and all of Europe) an enormous push towards Eurasia, toward a multi lateral global trading environment, (sorry fanatic believers in a one world, totalitarian collectivist government, but it’s looking less likely to happen every day).
Like I keep saying, it’s impossible to do political satire these days. Nobody could ever make up anything as crazy as the truth.
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