Public Policy Inference : Save the nation by Trade Surplus, Appreciating and Stable Currency, keep Internal and External Debt Low, Create Revenue Generating Assets with social policies matching with the earnings and saving with rate of capital formation. Monetize Unproductive Asset like Gold and Land but with in the country. Keep the Assets of the nation within Country. Balance the same with Risk Profile. Capture international Assets and develop Scale and intellect to rule the Industry specific for negotiating power.
Why not Have BIS issue Currency or coin for Trade with a settlement Guarantee Fund and for Local and Reginal Currency, Nations to manage themselves !!
Eventual Acceptance of Trust Deficit, Tether as USD Coin : Is it Nationalization or Internationalization or Privatization of US Corporate's worth / Markets - Least Written and Analyzed
The question and many more going forward should be an eye opener for many and most and even for bankers, investment bankers and central bankers, professors of theory and practice in economics should be contemplating of the uncertainty and direction alongwith how much less is shared and taught or discussed!
Fixation and Regulated World of Symbiotic Relationship of Markets
Forex Fx, Money MM, Equities Eq, Coins DEX, Commodities CMD (Non Ferrous, Rare Earth REM, Bullion CMD, Agriculture, Ferrous, and Energy - Crude, Gas)
Leaving zero liability of FED, later like in 1973 gold pegging was removed, USD to USDT pegging will also be taken off !
Hidden Agenda, Reason of Having USD as a reserve Currency and its consequent Impact ?Hidden Agenda, Reason of having SWIFT and Settlements in US and By US ?Hidden Agenda, Reason of having SEC as the role model ?Hidden Agenda, Reason of having GDR's and FII/LP's/Portfolio Investments ?Hidden Agenda, Reason, Role and Sanctity of UN, USAID, IFC, World Bank and what they have been doing ?Hidden Agenda, Reason, Role and Sanctity of controlling all Markets - Owning, Controlling by US, Russia and Europe leading to Price Fixation of Commodities, Interest Rates - World Follows !is QE QT a solution ?Basis and evolution of Empires and Dynasties of last 500 years and its impact on questions above.BIS, Internal Debt, Euro Dollar Market, Dollar Parity with EURO, LIBOR to SOFR, Trading Basket, Weightage, Interest and Ferguson Law
https://www.congress.gov/crs_external_products/IF/PDF/IF11707/IF11707.4.pdf
https://www.congress.gov/crs-product/IF11707
It has been written analysed and discussed that the USD has become worse than a Coin and that its worth is questionable in last 10 years and more so in last 5 years after COVID with QE policies and as almost 1T USD is interest outgo, 3.36 is average Int Rate on Treasuries/Bonds, this makes average maturity of around 10 years of bonds, which is more than Defence spending of around 800BUSD. With Internal debt of almost 37T USD and almost 55-59% of Printed / Lending in USD to outside US due to its acceptance as Reserve Currency. in Value Terms it is around 20-25BUSD in outside of US.
A mindset change is required as per the new administration on issues of Serving of International Obligations, Increase of Internal Debt, tools to strengthen internal assets and capital formation and reduced outsourcing.
It took almost 30 years and 2 world wars with maximum looting and 2 Nuclear bombings by US to reach a 70% reserve denomination by the world. Then it took almost 25 years to reduce it by 10-11% to 55-60%.
Even this reduction is making US and USD jittery and not able to manage. Europe, EURO, Pound and LIBOR lost ground. CIS broken away smaller countries are not contributing and Russia is not weaker but has doubled in last 10years from 1T to 2 T economy with continuous TAG of Defence and Space Super Power.
Hence, Reason for Tariffs, asking for almost 1T dollars of investments, looking inward and reduced outsourcing are few actions being taken.
TETHER COIN USDT
1. USDT's operations and impact on international trade
· Operations: USDT is a centralized stablecoin issued by the private company Tether Limited, pegged to the U.S. dollar, and backed by a reserve of assets (cash, Treasury bills, etc.). It operates on various blockchains, enabling fast, low-cost cross-border transactions. This bypasses the traditional banking system's often slow and expensive processes.
· Impact on corporates: Corporations, especially those in high-inflation regions or emerging markets, can use USDT for liquidity management, cross-border payments, and as a stable store of value against volatile local currencies. This streamlines international transactions, reduces currency risk, and lowers transaction fees.
· Role in international trade: USDT serves as a "bridge currency" between cryptocurrencies and traditional finance, facilitating international trade and remittances. It is particularly valuable in regions with limited access to traditional banking services.
2. Rationale for banks/corporates issuing coins (Private Stablecoins)
· Circumventing traditional finance: Private stablecoins emerged to address inefficiencies and fill gaps left by traditional financial institutions. They offer faster, cheaper, and more accessible alternatives, especially for cross-border payments.
· Blockchain advantages: They leverage blockchain technology for transparency, security, and immutability. Transactions are recorded on a public ledger, reducing fraud and increasing trust among participants.
· Monetary policy complication: The rise of stablecoins complicates central bank monetary policy. If too much money moves into stablecoins, it could make it harder for central banks to control inflation and interest rates, as stablecoins operate outside traditional banking systems.
3. Privatization vs. Nationalization
· Private issuance (Privatization): USDT's issuance by a private company is a form of privatized money. It operates outside direct government control, though it is subject to increasing regulatory scrutiny. The growth of private stablecoins represents a trend toward private entities managing and issuing money.
· Central Bank Digital Currencies (CBDCs) (Nationalization): In contrast, a CBDC is a digital form of a country's national currency, issued and controlled by the central bank. It represents the nationalization of digital currency, offering control over monetary policy, but raising concerns about surveillance.
· The debate: The growth of private stablecoins like USDT and the development of CBDCs reflect a tension between private sector innovation and central bank control over monetary policy.
4. Impact on US Fed's liability, trust, and trade
· US Fed's liability: The rise of private stablecoins does not directly reduce the US Fed's liability, as they are not issued or backed by the Fed. However, they can impact the financial system by potentially reducing demand for traditional bank deposits if users shift funds into stablecoins.
· Impact on trust: USDT's transparency issues, regulatory scrutiny, and past controversies have eroded trust in the stablecoin, though it remains widely used. A stablecoin's stability relies on trust in its issuer and reserves. The recent rise of regulated stablecoins could increase institutional trust.
· International trade and settlement: USDT significantly impacts international trade by offering a more efficient settlement system than traditional banking. It reduces transaction costs and speed, particularly in high-inflation regions. However, regulatory uncertainty and issuer risk remain challenges for businesses.
Summary of USDT's role and its implications
USDT, as the leading private stablecoin, has emerged as a significant force in global finance by offering a faster, cheaper, and more accessible alternative for international payments and a stable store of value in volatile markets. While its private issuance and growing adoption represent a form of monetary privatization, its success is a direct challenge to the traditional banking system and central bank control. This has prompted central banks to explore their own digital currencies (CBDCs) as a nationalized alternative to maintain monetary policy control.
The implications for the US Fed are complex. The rise of private stablecoins does not reduce the Fed's direct liability but could affect the banking system's stability and complicate monetary policy. The long-term impact on international trade hinges on regulatory developments and the ongoing competition between private and public digital currencies. While USDT has democratized finance for many, its success also comes with ongoing concerns about trust, transparency, and regulation, which all have an impact on its long-term viability and role in global settlements.
Strategic Reasons and Background
A number of conspiracy theories and analyses suggest hidden motives or strategic moves behind the creation and operation of Tether (USDT), going beyond the stated goal of providing a stable digital currency .These analyses often focus on the company's opaque reserve management, its influence on crypto markets, and its potential role in circumventing financial regulations . While Tether maintains it operates transparently and legitimately, these alternative perspectives have been documented in various publications and are worth considering.
Here are some of the key conspiracy theories and alleged strategic moves behind Tether:
1. Market manipulation and artificial price support
· The Theory: Tether, through unbacked USDT issuance, has allegedly been used to inflate the price of Bitcoin and other cryptocurrencies . The argument is that Tether created new USDT without sufficient reserves and then used this "printed" money to buy Bitcoin, driving up demand and price.
· Published Basis: A 2018 study from the University of Texas suggested that Tether was used to prop up Bitcoin during the 2017 bull run. While the study is not definitive proof, it highlights the concern that Tether's issuance correlated with rises in Bitcoin's price. The lack of transparency around Tether's reserves has fed this theory.
2. Circumventing traditional financial systems and sanctions
· The Theory: Tether operates as a shadow bank, allowing for transactions that bypass traditional financial institutions and regulations. This could potentially allow individuals or entities to evade taxes, move money across borders without official oversight, and circumvent international sanctions.
· Published Basis: The US government has recognized that cryptocurrencies can be used to evade sanctions, with Iran reportedly using Bitcoin to bypass restrictions [5, 6]. While this doesn't prove Tether's direct involvement, its design facilitates such activity, making it a target for regulatory scrutiny. The US Treasury has warned of the risks posed by stablecoins in this regard.
3. A private, unregulated global banking system
· The Theory: Tether and its affiliates are building a private, unregulated financial system outside the control of central banks and governments. By offering a dollar-pegged coin, they are essentially creating a global, private currency.
· Published Basis: Financial journalists and analysts have documented Tether's opaque operations and its relationship with other crypto entities like Bitfinex . This has led to speculation that the true goal is not just a stablecoin but a complete financial ecosystem that operates with minimal government interference. This is why governments are increasing regulatory efforts to bring stablecoins under control.
4. Backing by opaque and risky assets
· The Theory: Tether's reserves are not fully backed by cash and are instead composed of risky assets like commercial paper, bonds, and other less liquid instruments. This makes the reserve vulnerable to market fluctuations and could lead to a catastrophic collapse if a "bank run" were to occur.
· Published Basis: In 2021, Tether finally published a reserve breakdown showing that only a fraction of its backing was in cash, with the majority being commercial paper and other assets. While Tether has since reduced its commercial paper holdings, the initial lack of transparency and reliance on these assets raised significant concerns about the stability of the entire ecosystem.
5. Regulatory arbitrage and avoiding oversight
· The Theory: Tether's operations have been deliberately set up in jurisdictions with lenient regulations to avoid strict oversight. By operating in this manner, Tether can function with less scrutiny than traditional banks or US-based stablecoin providers.
· Published Basis: Tether has faced legal and regulatory challenges, including a settlement with the New York Attorney General over claims of misrepresenting its reserves [4]. This history of regulatory issues fuels suspicion that the company’s business model is designed to sidestep financial oversight.
It is important to note that these are theories and criticisms, and Tether consistently denies any wrongdoing, insisting that its operations are legitimate and its reserves are sound. However, the lack of complete transparency and its history of legal issues have provided fertile ground for these alternative narrativesRelevant Case Studies and Repeating situations QE and reduced USD /Decoupling :
Panic of 1873, the Great Depression, and the 2008 Global Financial Crisis, identifying common elements such as credit expansion, speculative bubbles, and regulatory failures to draw parallels with current economic conditions
Comparative analysis of economic crises in Germany, Venezuela, Zimbabwe, and Japan
Factor
Germany (Weimar Republic, 1921–1924)
Venezuela (2016–present)
Zimbabwe (Late 1990s–2008)
Japan (Post-WWII and since 1990s)
Primary Causes
War Reparations: Astronomical debt payments imposed after WWI.
War-Related Production Collapse: Significant industrial capacity was lost or damaged.
Political Instability: The new Weimar Republic was fragile and faced numerous political shocks.
Passive Resistance: The government printed money to support striking workers during the French occupation of the Ruhr.
Loss of Public Trust: Widespread loss of faith in the government and economy fueled the crisis.Oil Price Collapse: Over-reliance on oil exports left the economy vulnerable when prices crashed.
Fiscal Mismanagement: Unsustainable government spending and expansionary monetary policy.
Corruption: Widespread corruption within the state oil company and government.
Price and Currency Controls: Government controls led to severe shortages and a black market.
Political Turmoil: Autocratic rule and political instability.Land Reform: Seizure of commercial farms collapsed agricultural output, the economy's backbone.
War Spending: Financing military intervention in the Congo by printing money.
Political Instability: Loss of investor confidence and capital flight.
Poor Governance: Widespread corruption and economic mismanagement.
Drought: A contributing factor that exacerbated food shortages.Post-War Devastation: Significant industrial damage and large deficits.
1970s Oil Shocks: External price shocks impacted inflation.
Asset Bubble Burst (1990s): Collapse of asset prices and excessive debt.
Measured Monetary Policy: The central bank has exercised more control to avoid hyperinflation.
Demographics: Aging population and shrinking workforce contribute to economic stagnation.Key Events & Triggers
- WWI Reparations: Set at 132 billion gold marks in 1921.
- Ruhr Occupation (1923): French and Belgian troops occupied the industrial region.
- Passive Resistance: Government financed strikes by printing money.
- Dawes Plan (1924): Restructured reparations and introduced a new currency.- Oil Price Crash (2014): Plummeted from ~$100 to ~$40 per barrel.
- Economic Mismanagement: Poor policies by Chávez and Maduro.
- US Sanctions: Imposed from 2018 onwards.
- Corruption: Mismanagement of state-owned enterprises.- Land Reform (began ~2000): Forced seizure of farms.
- Congo War (1998–2003): Military spending financed by printing money.
- Political Instability: Widespread corruption and poor governance.
- Drought: Exacerbated food shortages.- Post-War Devastation (1945): Industrial damage.
- Oil Shocks (1970s): External price shocks.
- Asset Bubble Burst (1990s): Collapse of asset prices.
- Aging Demographics: Declining workforce and aging population.Currency Dynamics & Values
Extreme Hyperinflation: Reached a peak monthly rate of over 726 billion% in 1923.
Exchange Rate: The mark became worthless, reaching 4.21 trillion marks to one US dollar by Nov 1923.
Resolution: Currency reform with the introduction of the Rentenmark and Reichsmark.Protracted Hyperinflation: Peaked at over 63,000% annually in 2018.
Severe Devaluation: The BolÃvar became effectively worthless, with an exchange rate reaching 248,832 bolÃvares to one US dollar (official) in Aug 2018.
De Facto Dollarization: The US dollar is widely used for transactions.Catastrophic Hyperinflation: Peaked at a monthly rate of 79.6 billion% in Nov 2008.
Currency Abandonment: The Zimbabwean dollar was abandoned in 2009 in favor of a multi-currency system.
New Currency Struggles: The re-introduced ZWL has faced rapid depreciation.Controlled Inflation (Post-WWII): Experienced a high of 24.9% in Feb 1974 but avoided a spiral.
Persistent Deflation (Since 1990s): Faced long periods of low inflation or deflation.
Stable Exchange Rate: The yen has remained a stable global currency, unlike the other cases.Money Market & Bond Market
Collapse of Markets: Hyperinflation wiped out both money and bond markets. Bonds issued pre-WWI became worthless, and the currency's instability made money market instruments impossible.
Impact: Eliminated any mechanism for the government to raise non-inflationary funds, forcing reliance on the printing press.Degradation of Markets: Government bond issuance was primarily bought by the central bank, fueling hyperinflation. Money markets effectively ceased to function in the local currency due to its volatility.
Impact: Eliminated internal borrowing and access to international capital markets, trapping the government in a cycle of printing money.Destruction of Markets: The local currency bond and money markets were completely destroyed by hyperinflation. The government's fiscal irresponsibility and printing led to a total loss of investor confidence.
Impact: Forced reliance on seigniorage (money printing) for government finance, which accelerated the collapse of the currency and economy.Japan Government Bond (JGB) Market Creation & Impact:
- Post-WWII: Government issued bonds to finance reconstruction.
- Purpose: To manage budget deficits and provide a benchmark for Japanese interest rates.
- Role in Deflation: JGBs became central to the Bank of Japan's quantitative easing policy. The BOJ aggressively bought JGBs to inject money into the economy and fight deflation. This created an ultra-low interest rate environment.
- Market Stability: Supported by high domestic savings and institutional ownership, the JGB market remains deep and stable despite massive government debt.
- Social Impact: Zero/negative interest rates have provided cheap government financing but penalized savers and retirees.Economic Sectors
Financial Sector: Total collapse, wiping out savings and credit markets.
Manufacturing: Crippled by the inability to plan, access credit, or import materials.
Agriculture: Food production declined as farmers refused worthless currency.
Services: Commercial activity ground to a halt due to the worthless currency.Oil Sector: Output plummeted due to corruption and lack of investment.
Manufacturing: Severely impacted by price controls, shortages, and lack of inputs.
Retail: Shifted to the black market; formal retail struggled.
Healthcare: Suffered from severe shortages of supplies.Agriculture: A 45% drop in output following land reforms.
Manufacturing: Output fell 29% in 2005 due to economic instability.
Banking Sector: Collapsed due to hyperinflation.
Mining: Output declined significantly.Manufacturing: Rapid post-war growth (automobiles, electronics); later focused on technology and efficiency.
Financial Sector: Stagnated in the 1990s due to bad loans.
Technology & Exports: Key drivers of economic growth.
Retail & Services: Affected by deflationary pressures and lower demand.Social Impact
Destruction of Savings: The middle class and those on fixed incomes were financially ruined.
Hunger and Poverty: Widespread food shortages and severe poverty.
Political Extremism: Erosion of faith in democracy, fueling extremist movements.
Social Unrest: Widespread hardship and riots.Widespread Impoverishment: The vast majority of the population plunged into poverty.
Mass Migration: Millions fled the country, creating a major humanitarian crisis.
Social Unrest and Crime: Fuelled by economic collapse and desperation.
Healthcare Crisis: Severe shortages and decline in public health.Extreme Poverty and Emigration: Massive impoverishment and large-scale emigration, leading to a "brain drain."
Increased Inequality: Wealth concentrated among those with access to foreign currency.
Collapse of Public Services: Education and healthcare systems failed.Economic Miracle: High employment, improved living standards, and social stability post-WWII.
Lost Decades Impact: Increased job insecurity, stagnant wages, and generational inequality.
Demographic Challenges: Strain on social welfare programs from an aging population.Resolution
Currency Reform: New currency backed by tangible assets, restoring stability.
International Aid: The Dawes Plan restructured reparation payments.
Political Stabilization: The government restored some level of order.De Facto Dollarization: Informal adoption of the US dollar provides some stability.
Policy Shifts: Easing of economic controls.
Underlying Issues: Systemic corruption and mismanagement remain significant challenges.Currency Abandonment: Adoption of a multi-currency system in 2009.
Limited Recovery: Persistent economic and social challenges continue to plague the country.Austerity and Monetary Policy: Stabilization measures implemented post-WWII.
Unconventional Monetary Policy: Quantitative easing and low interest rates to combat deflation.
Structural Reforms: Ongoing efforts to address long-term stagnation.
Relevant Concepts and their relevance
Head
Definition
Key strategic points
Objective
Symbiotic relationship
Value in USD terms
BIS
Bank for International Settlements: An international financial institution that acts as a bank for central banks. It fosters international monetary cooperation and provides a forum for central banks.
Bureau of Indian Standards: The national standards body of India for product quality and safety.Financial Stability: Promotes international monetary and financial stability through cooperation.
Regulatory Standards: Sets standards, such as those related to capital adequacy (e.g., Basel accords).
Research: Publishes economic and financial research.Monetary Cooperation: Fosters cooperation among central banks.
Banking Supervision: Promotes and supports best practices in banking supervision.Central Banks: Serves as a hub for central banks to discuss and coordinate financial and monetary policies.
Global Financial System: Its work on standards (like Basel III) influences the stability and regulation of the entire global banking system.Unquantifiable: The BIS's value is derived from its function as a central banker's bank, not as a currency or investable asset.
US Internal Debt
The portion of a country's national debt held by its own residents, investors, and government entities. This includes both "intragovernmental debt" and debt held by the public domestically.
Intragovernmental Debt: Includes debt held by government trust funds like Social Security.
Domestic Public Debt: Includes Treasury securities held by domestic private investors and the Federal Reserve.
Fiscal Management: Enables the government to finance its operations and budget deficits.Fiscal Management: Enables the government to finance its operations, programs, and budget deficits.
Economic Stimulus: Allows the government to increase spending during economic downturns.Government Spending and Taxation: A deficit (spending > revenue) leads to borrowing, increasing the debt.
Financial Markets: Creates a large, stable market for government bonds, influencing domestic interest rates.Approx. $37.64 Trillion as of fiscal year 2025 for the entire US national debt, though the exact split between internal and external debt is not constant.
Eurodollar Market
US dollars deposited in commercial banks outside the United States, operating beyond the direct control of the Federal Reserve.
Regulatory Freedom: Operates outside US regulations, allowing for flexibility and cost efficiency.
Liquidity Management: Provides a source of short-term, dollar-denominated funding for financial institutions globally.
Global Reach: A major international capital market.Cross-border Finance: Facilitates international trade and finance by providing a global pool of dollar liquidity.
Interest Rate Management: Offers market-driven rates for both lenders and borrowers, often better than domestic rates.Global Banking System: Banks globally use this market to manage their dollar liquidity.
International Trade: Provides crucial dollar financing for businesses engaged in international commerce.Approx. $13.8 Trillion as of 2016, though use has declined since then.
Dollar Parity with EURO
The specific exchange rate condition where one euro is equal in value to one US dollar (EUR/USD = 1.00).
Economic Perception: Carries significant psychological weight, representing the relative economic strength of the US and Eurozone.
Monetary Policy Divergence: Driven by differing interest rates and economic outlooks between the Federal Reserve and the European Central Bank.
Market Forces: The exchange rate is determined by the supply and demand for the respective currencies.Relative Value Indicator: Acts as a benchmark for comparing the economic health and monetary policy stances of the US and Eurozone.
Trade and Investment Analysis: Helps investors gauge the attractiveness of assets denominated in each currency.Trade and Competitiveness: A stronger dollar makes US exports more expensive.
Central Banks: Monetary policy decisions directly impact the exchange rate.$1 = €0.86 as of October 2025.
LIBOR to SOFR
The market-wide transition away from the discredited London Interbank Offered Rate (LIBOR) to the more robust Secured Overnight Financing Rate (SOFR) for USD-denominated instruments.
Risk-Free Rate: SOFR is based on actual, secured transactions in the repo market, eliminating credit risk.
Transparency and Reliability: SOFR is less susceptible to manipulation due to its transaction-based nature.
Benchmark Integrity: The transition restores confidence in benchmark rates.Benchmark Integrity: To replace a flawed benchmark with a credible and transparent one.
Financial Stability: To reduce systemic risk by ensuring benchmark rates reflect actual market activity.Market Transition: Requires massive coordination across financial institutions, borrowers, and derivatives markets.
Financial Products: Necessitates replacing or adjusting existing contracts.Not a currency: Both are benchmark interest rates, not currencies with a USD value.
Trading Basket
A portfolio management strategy that involves buying or selling multiple securities simultaneously in a single order.
Diversification: Distributes risk across multiple assets.
Thematic Investing: Allows investment in specific sectors or investment styles.
Efficiency: Reduces execution time and transaction costs.Efficient Portfolio Management: Streamline the execution of multiple orders.
Strategic Execution: Implement complex investment strategies with a single command.Portfolio Components: The basket's performance is the weighted sum of its components' performance.
Market Movements: The basket's value responds to the collective movement of its constituent securities.Dependent on assets: The value is dependent on the specific securities and currencies included in the basket and their current market prices.
Weightage
The relative proportion or percentage of a particular security or asset within a portfolio or market index.
Index Impact: A higher weightage gives a security a greater influence on the index's performance.
Asset Allocation: A tool for managing diversification and risk.
Performance Analysis: Measures how different components contribute to returns.Diversification Management: Ensure a balanced and diversified portfolio.
Risk Control: Control exposure to specific assets or sectors.Asset Performance: An asset's weightage determines its influence on the total portfolio's return.
Rebalancing: The weightage can shift due to performance, requiring adjustments.Dependent on value: Weightage is a percentage and does not have a USD value itself, but is calculated based on the USD value of the asset in the portfolio.
Interest Rate
The cost of borrowing money or the return earned on invested capital, expressed as a percentage of the principal.
Central Bank Policy: Sets key rates, influencing borrowing costs.
Risk and Creditworthiness: The rate charged depends on the borrower's perceived risk.
Inflation: A key tool for managing inflation.Credit Provision: Facilitates lending and borrowing.
Economic Control: Controls the money supply and manages inflation.Lenders and Borrowers: A mutually beneficial relationship where lenders earn a return and borrowers gain access to capital.
Inflation: High inflation can erode the real return on interest, while a central bank raising rates to combat inflation can increase borrowing costs.Variable: Interest rates vary based on central bank decisions and market conditions, not a fixed USD value. For example, the average interest rate on US national debt for 2025 was 3.36%.
Ferguson Law
A principle stating that a great power will decline if its interest payments on debt consistently exceed its defense spending.
Fiscal Sustainability: Highlights the risk of uncontrolled government debt.
Spending Priorities: Places a stark choice between national defense and debt servicing.
Market Confidence: Assumes that rising debt servicing costs could signal fiscal irresponsibility to markets.Fiscal Prudence: Serves as a cautionary principle for governments to manage their debt responsibly.
Economic Warning: Offers a framework for assessing long-term risks to a nation's economic and military power.Government Debt and Defense: Creates tension in a government's budget between debt payments and defense spending.
Creditors and Government: The government's need to service debt payments is dependent on its ability to tax and borrow, linking it to the interests of its creditors.USD costs: In 2024, US debt servicing costs exceeded defense spending, which tests the "law" in a modern context.
Basket of Main Currencies
A portfolio of major global currencies, used for benchmarking or reducing exchange-rate volatility. A key example is the US Dollar Index (USDX).
Risk Mitigation: For investors, it reduces the risk from relying on a single currency's performance.
Exchange Rate Management: Central banks use it to manage their own currency's value relative to a major set of trading partners.
Performance Measurement: Provides a benchmark for evaluating relative currency strength.Currency Stability: To reduce the volatility of a currency.
Portfolio Diversification: To spread risk and gain broad exposure to foreign exchange movements.Global Trade and Capital Flows: The basket reflects the trade and economic relationships between major global economies.
Monetary Policy Coordination: The value and weight of currencies in a basket are influenced by the monetary policies of the respective central banks.USDX Weights: The USDX contains major currencies weighted by trade with the US:
- Euro (EUR): 57.6%
- Japanese Yen (JPY): 13.6%
- British Pound (GBP): 11.9%
- Canadian Dollar (CAD): 9.1%
- Swedish Krona (SEK): 4.2%
- Swiss Franc (CHF): 3.6%Summary analysis
· Common thread: The hyperinflation cases of Germany, Venezuela, and Zimbabwe share a core dynamic: a severe economic shock (war, oil price crash, or land reform) leads to a decline in productive output. Governments then respond by printing money to cover expenses, which further fuels inflation and destroys confidence in the currency.
· Contrasting case (Japan): Japan did not experience hyperinflation. While it faced periods of high inflation following WWII and the 1970s oil shock, its central bank and fiscal policy responses were more effective, preventing a hyperinflationary spiral. More recently, Japan has contended with the opposite problem: persistent deflation.
· Consequences: The consequences across the hyperinflationary economies were remarkably similar: massive wealth destruction, social chaos, increased poverty, and a loss of faith in political institutions.
· Resolution: Resolving hyperinflation typically requires a combination of ending the root cause of excessive money printing, implementing a credible currency reform, and rebuilding public trust.
The geopolitical context behind international finance and institutions
USD as the world's reserve currency
The US dollar's status as the global reserve currency is rooted in a combination of historical dominance, economic fundamentals, and geopolitical influence.
· Conventional reason: Following the economic devastation of World War II, the US was the only major power with a fully intact and dominant economy. The 1944 Bretton Woods agreement established a system where other currencies were pegged to the dollar, which was, in turn, convertible to gold. Even after President Nixon ended convertibility in 1971, the dollar's momentum, stability, and liquidity—backed by a large, transparent US economy—kept it as the primary reserve currency.
· Geopolitical impact ("Hidden Agenda"): The demand for dollars from central banks and global trade allows the US to finance large trade and budget deficits at lower costs than other countries. This has been a key tool of American foreign policy. For instance, the petrodollar system, established with Saudi Arabia in the 1970s, ensured global oil was priced in dollars, cementing its demand. The US can also exert significant pressure through sanctions by restricting access to the dollar system, as it has against countries like Iran and Russia.
SWIFT and settlements in the US
The Society for Worldwide Interbank Financial Telecommunication (SWIFT) is a global financial messaging system. Payment clearinghouses, like CHIPS in New York, are where the actual settlement of dollar transactions takes place.
· Conventional reason: SWIFT was created in 1973 to replace the insecure Telex system, making international financial communication faster and more secure. Since the US dollar is the world's reserve currency, a vast number of transactions naturally flow through the US banking system and its settlement infrastructure, such as CHIPS.
· Geopolitical impact ("Hidden Agenda"): While SWIFT is a cooperative owned by member institutions, it is subject to US and European law. This gives the US significant leverage. By working with the EU, the US can weaponize the SWIFT system to enforce financial sanctions, as seen in the disconnection of Iranian and Russian banks. This has prompted sanctioned countries and geopolitical rivals to seek alternative, parallel payment systems.
SEC as a regulatory "role model"
The US Securities and Exchange Commission (SEC) regulates US financial markets to ensure transparency and protect investors. Its regulations often influence global standards.
· Conventional reason: The SEC was established in 1934 to restore faith in US markets after the 1929 stock market crash. Its purpose is to ensure fair dealing, prevent fraud, and mandate transparent financial disclosures. The prestige of US capital markets and the sheer size of the economy mean that foreign companies often adopt US standards to access US investors.
· Geopolitical impact ("Hidden Agenda"): By influencing global regulatory norms, the SEC extends the US legal and regulatory framework internationally. This has been criticized as regulatory overreach and the "weaponization" of US market access to force ideological preferences on international bodies. This can impose significant compliance costs on foreign companies, with US regulators potentially affecting global regulatory frameworks outside of the domestic US context.
GDRs, FIIs/LPs, and portfolio investments
Global Depository Receipts (GDRs), Foreign Institutional Investors (FIIs), Limited Partners (LPs), and portfolio investments are all mechanisms for international capital to flow into a country.
· Conventional reason: These mechanisms provide developing countries with access to foreign capital for investment and economic growth. FIIs/LPs seek returns by investing in emerging markets, while GDRs allow foreign companies to access US and European stock markets more easily. This capital inflow can bridge investment and technology gaps.
· Geopolitical impact ("Hidden Agenda"): Foreign capital flows can also be volatile, leading to instability if they reverse suddenly. The influx of portfolio investment is not without risk, as it can expose domestic economies to international market shocks and potentially lead to asset price inflation.
UN, USAID, IFC, World Bank: Role, sanctity, and actions
These multilateral organizations were formed after WWII to promote international cooperation, stability, and development.
· Conventional reason:
o UN: Fosters international peace and cooperation, focusing on social, economic, and human rights issues.
o USAID: Administers foreign aid and development assistance to support developing countries.
o IFC: A member of the World Bank Group that focuses on private sector development and investment in developing countries.
o World Bank: Provides loans and grants to countries for capital projects and promotes long-term development.
· Geopolitical impact ("Hidden Agenda"): These institutions, particularly the World Bank and IFC, operate with a weighted voting system where countries' votes are proportional to their capital subscriptions. This gives larger contributors, especially the US, disproportionate influence over institutional policies and lending decisions. Critics argue that the policies they promote often align with the economic interests of dominant powers and can impose specific economic ideologies on borrowing countries.
Controlling markets: Price fixation of commodities and interest rates
The idea of US, Russia, and Europe fixing commodity prices and interest rates is an oversimplification of a complex geopolitical dynamic.
· Conventional explanation: Commodity and interest rates are determined by global supply and demand dynamics, influenced by geopolitical tensions, natural disasters, and central bank monetary policy. For example, a war in Ukraine disrupted global grain and oil supplies, impacting prices. Central banks like the US Federal Reserve influence global interest rates through their monetary policy, particularly when the currency is a reserve asset.
· Geopolitical reality ("Hidden Agenda"): While not "fixed," global powers exert significant influence over market outcomes. Sanctions, trade wars, and military conflicts can create market disruptions that disproportionately benefit some actors. For instance, US sanctions on Russian and Iranian oil have impacted global supply and energy prices.
Evolution of empires and impact on global finance
The legacy of empires over the last 500 years has profoundly shaped the modern global financial system.
· Basis and evolution: The rise and fall of empires, such as the Spanish, British, and Russian, determined the global power structure. These empires established vast trading networks, legal frameworks, and financial institutions that formed the bedrock of modern finance. The British Empire's financial system, for instance, relied on the pound sterling as a global reserve currency, a role the US dollar later assumed.
· Impact on contemporary finance: The institutions, rules, and power dynamics of today's global economy are a direct evolution of this imperial history. The structures of the UN, World Bank, and IMF were created in the post-imperial period, reflecting the new balance of power. The reliance on a dominant reserve currency and a centralized payments system, while offering stability, perpetuates a hierarchy of power that gives disproportionate influence to the nations at the top, a dynamic directly linked to the imperial past. The struggles over market control and geopolitical influence are modern manifestations of these historical power struggles, but now fought through economic and financial means rather than outright conquest.
· Conspiracy theories suggest that a hidden agenda exists behind the dominance of the US dollar, Western-led financial institutions, and specific market mechanisms, aiming to control global financial markets and exert political influence. These theories often blend legitimate economic concepts with claims of deliberate manipulation by a powerful elite. While these theories are widely debated, several published sources discuss the geopolitical implications and potential misuse of these systems, which form the basis for many of these conspiracy narratives.
Conspiracy theories regarding the US Dollar as a reserve currency
The central conspiracy theory revolves around the concept of "exorbitant privilege," where the US abuses its power by exploiting the dollar's status.
· The theory: It is claimed that a cabal within the US government and powerful financial institutions deliberately orchestrated the dollar's ascent after World War II to serve their own interests. They allegedly manipulate the money supply and leverage high debt to maintain a cycle of dependency, forcing other nations to acquire dollars to facilitate international trade.
· Published basis: Academic and economic analyses confirm the US benefits greatly from this status, which allows it to finance large deficits and projects at lower costs. The strategic move to decouple the dollar from gold in 1971 is also cited as a key event demonstrating US influence and power. Some sources acknowledge that while the dollar's stability is beneficial for global trade, this "exorbitant privilege" has a tangible geopolitical impact that can be exploited for political gain.
Conspiracy theories regarding SWIFT and US settlements
Conspiracy narratives concerning SWIFT and US payment systems center on the alleged use of financial infrastructure as a weapon for control.
· The theory: Proponents claim that the US deliberately positions itself as the primary hub for international dollar settlements to monitor and control financial transactions globally. The theory suggests the US weaponizes this control through SWIFT to enforce its will on other nations through sanctions and by blocking access to the global financial system.
· Published basis: It is a documented fact that the US, through its influence over SWIFT and payment clearinghouses like CHIPS, has been able to enforce financial sanctions against countries like Russia and Iran. Geopolitical analyses often discuss the leverage this gives the US and the subsequent search for alternative payment systems by targeted nations.
Conspiracy theories regarding the SEC as a "role model"
Conspiracy theories frame the SEC's influence as a form of regulatory imperialism, forcing other countries to conform to US standards.
· The theory: The SEC, under the pretense of "market stability," is allegedly used by US interests to impose US financial regulations on other countries, thereby extending US legal and corporate control globally. This is portrayed as a deliberate effort to create an uneven playing field that benefits American companies.
· Published basis: While the SEC's purpose is to ensure fair markets, there is evidence that the US often attempts to project its regulatory standards internationally. The sheer size and influence of US capital markets means that foreign companies often have to comply with SEC standards if they wish to access US investors. Some published works discuss the tension between US regulatory standards and the sovereignty of other nations.
Conspiracy theories regarding GDRs, FIIs/LPs, and portfolio investments
The conspiracy narrative focuses on how foreign investment is used as a tool for economic dominance.
· The theory: It is claimed that these investment mechanisms are not just about capital flow, but are a means for powerful foreign interests (primarily US and European) to penetrate and control the economies of developing countries. By using sophisticated financial tools, they allegedly strip assets, manipulate markets, and destabilize local economies for profit.
· Published basis: Regulatory bodies like SEBI have taken action against entities for manipulation related to GDRs. Some academic studies also note the role of foreign investment in creating market instability and vulnerability in developing nations. Critics argue that the volatility of these capital flows can lead to asset inflation and potential market crashes, which can be detrimental to local economies.
Conspiracy theories regarding the UN, USAID, IFC, and World Bank
These theories portray multilateral institutions as puppets of Western powers, especially the US, rather than neutral arbiters.
· The theory: It is alleged that these institutions are fronts for imposing a "New World Order" and Western economic and political ideologies on the rest of the world. Critics point to the weighted voting systems, which give larger contributors like the US disproportionate influence over policy decisions, as evidence of their lack of neutrality.
· Published basis: The weighted voting system of the World Bank and IFC is well-documented. Academic and political analyses discuss how these institutions, particularly the World Bank, have historically promoted economic policies that align with Western interests, sometimes leading to unfavorable outcomes for borrowing nations. The perceived lack of neutrality and the imposition of specific economic conditionalities have led to criticism, though the idea of a secret "New World Government" is largely considered a fringe theory.
Conspiracy theories regarding market control and price fixation
These narratives claim that major global powers secretly collude to control global markets.
· The theory: The claim is that countries like the US, Russia, and Europe orchestrate global commodity prices and interest rates to their advantage. This is allegedly done through a combination of market manipulation, sanctions, and coordinated economic policies to maximize their own geopolitical and economic interests.
· Published basis: Published research discusses how geopolitical tensions can affect market stability and commodity prices. Monetary policies of powerful central banks like the US Federal Reserve have a significant impact on global interest rates, given the USD's status as the reserve currency. While outright price "fixation" is not openly documented, the influence of these powers on market dynamics through sanctions and monetary policy is acknowledged.
Published sources on financial conspiracy theories
· Source: Frontiers in Psychology
o Study: "Conspiracy Mentality Predicts Public Opposition to Foreign ..." (2021)
o Findings: The study notes that economic phenomena like globalization are fertile ground for conspiracy theories, as they can cause insecurity and confusion for many people. It points out that conspiracy beliefs can negatively impact decision-making in various life areas, including financial ones.
· Source: Digital disinformation and financial decision-making (Frontiers, 2025)
o Findings: This paper analyzed social media platforms and found a "sophisticated economic conspiracy narrative ecosystem" that blends global anxieties with local cultural elements. It describes "Currency Manipulation" theories, where conspiracy theorists "appropriate legitimate economic concepts" to create narratives of market control.
· Source: MDPI Journal
o Study: "The Strategic Exploitation of Conspiracy Theories by Populist ..." (2025)
o Findings: This paper discusses how populist leaders exploit conspiracy theories to shape national identities and consolidate power. It also links the formation of international institutions like the United Nations to Cold War-era conspiracy theories about a "shadowy, malevolent international government".
· Source: Investopedia and Economic Analyses.
To Watch
The steps proposed if activated, is bound to have create some difficult times for the banks but is going to be a boon for the BFSI sector of India and all Software companies in ERP, Trade & Commerce, Ports, Banks Core Banking Solutions, Treasuries like Resolute / Thomson/Reuters solutions, Central Banks, Markets will give huge business
Treasuries will have another asset class and desk to trade and arbitrage.
Happy Reading and analysing,
Dinesh Goel
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