The US Dollar used as an "economic weapon of mass destruction."

 via CNN

The US may have the world's most powerful military, but the dollar is its greatest weapon. Now, after nearly 80 years of dollar dominance, the US might be in danger of losing its global reserve currency status.

About 60% of the $12.8 trillion in global currency reserves are currently held in dollars, giving the US an exorbitant privilege over other countries. And that privilege pays: Because US government debt backed by the dollar is very attractive, interest rates are lower. The US gets to borrow from other countries in its own currency — so if the US dollar loses value, debt does too. American businesses can make international transactions in dollars without having to pay conversion fees.

Perhaps most importantly, in extreme circumstances the US can cut off dollar access to central banks around the globe, isolating and draining their economies. Raghuram Rajan, the former governor of the Reserve Bank of India calls this power an "economic weapon of mass destruction."

-----

 But with great power comes great responsibility: When you use a weapon of mass destruction, even an economic one, people get spooked. To protect themselves from the same fate as Russia, other countries diversify their investments away from the US dollar into other currencies.

Story here 

Yes.

I get the concern about Ukraine.  

But do you get my concern about how sanctions have been used like a club over the last 30 years?  Do you understand the privilege (and I use that word purposefully) that comes with having the world's fiat currency?

Do you understand the danger that will come if the US loses that privilege?

Most don't.

The problem?  This will touch on the US' ability to properly fund an adequate (much less the outrageous defense spending we do because so many have gamed the system where they trade in US dollars and are paid in US servicemembers lives/protection), will certainly affect our economic growth in the short and long term, and will alter the very trajectory of our children's lives.

I don't know what form this will take but you can bet that every country that has EVER been even glanced at sideways by US policymakers will be looking to insulate their economy from the type of sanctions that we're seeing now.

I don't have a better idea of how to "punish" Russia (still don't think this is our fight), but we're risking HUGE by doing things the way we are.

Oh and if Biden does reach for additional sanctions and IF Europe decides to get off Russian oil/gas NOW, then you can just pencil in that world wide recession NOW.  

Those actions will make it a certainty.