Global Investor: “U.S. Can Become a Secondary Power”

The Founder of GreyLock Capital, Hans Humes, has a warning. As the U.S. increasingly exerts its economic influence abroad, countries–including China–are rapidly trying to undermine the role of the U.S. dollar in the global economy.

“There’s an active effort to bypass the U.S. as a reserve currency,” Humes told me in this week’s edition of “AmericanConsequences.com.”

Without the dollar’s reserve status, the influence of the U.S. would be significantly diminished.

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“We can become a secondary power more quickly than we think,” he warns.

In recent days, the U.S. dollar has been rebounding, gaining more than 1.4% so far this week despite a Federal Reserve that has vowed to keep printing money. Its rise, however, is being met by Humes with skepticism. Long term, he fears the U.S. dollar may fall victim to the global communities’ desire to see more currency alternatives.

Humes should know. His firm, GreyLock Capital, represents U.S. debt holders’ investments all over the world. Humes was the only American on the Greek debt steering committee during the European Debt and has helped rebuild economies in some of the most forsaken parts of the world. Indeed, if there’s a country in need of economic and political change, there’s a good chance Hans and his firm is involved…he has led debt restructuring and investing efforts in emerging market countries from Venezuela to Argentina, Liberia, South Africa, and at present, Zambia.

Humes argues that the Europeans are increasingly frustrated with the implementation of U.S. sanction efforts around the globe and, tells me they may are looking for new alternatives on trade. “If another clearing mechanism gets put together by the ESM, the European Stabilization Mechanism, in cooperation with China, where they start denominating some of their trade-in other currencies, then, we’ll start to have a problem.”

The role as the reserve currency has provided the U.S. with an enormous role in influencing international policy but, increasingly, sanctions have become a sticking point. “If somebody breaks the sanctions, we can go after them, because of the dollar’s role in the clearing system.And, countries want to end that leverage.

This isn’t hypothetical,” he insists. They’re working on “putting together an alternative payment system,” and although he says, it would take time to implement, it is”absolutely something that is being worked on.”

The dollar has been the world’s reserve currency since the Bretton Woods agreement of 1944 when the World War II allies gathered in Bretton Woods, New Hampshire to create an agreement by which countries promised to maintain fixed exchange rates between their own currencies and the U.S. dollar.

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