| The REPO Act: A Precursor to the Dollar's Downfall | | by Nick Giambruno |  |
In the wake of Russia’s invasion of Ukraine in 2022, the US government has launched its most aggressive sanctions campaign ever. The US government and its allies froze around $300 billion of the Russian central bank’s reserves—the nation’s accumulated savings. It was a stunning illustration of the political risk associated with the US dollar and Treasuries. It showed that the US government could deny access to another sovereign country’s reserves at the flip of a switch. Recently, President Joe Biden signed the REPO Act into law. It allows the US government to seize frozen Russian state assets and transfer the funds to Ukraine. The US dollar and Treasuries have become weaponized in a way they had not before. They are now clearly not neutral assets worthy of forming the bedrock of the international financial system but political tools for Washington to coerce others. The rising political risk attached to Treasuries has made them even less attractive as a store of value. It’s now apparent to everyone that dollars are only dollars as long as you don’t upset the US government. Many countries are undoubtedly wondering if the US government will seize their savings if they run afoul with Washington. China is one of the largest holders of US Treasuries, and it indeed took note of what is happening. Since 2022—when the US froze Russian state assets—China has sold about 25% of its Treasuries, an enormous change in such a short period. In the first three months of 2024 alone, China dumped a record $53 billion worth of US Treasuries. Further, China has increasingly ditched the US dollar in international trade. For example, over 90% of the $240 billion in trade between Russia and China is done outside of the dollar in yuan and ruble. At the same time, China and Russia have been on a gold buying spree to make their economies and financial systems more resilient to US sanctions. China is the world’s largest producer and buyer of gold. Russia is number two. Most of that gold enters the Russian and Chinese governments’ treasuries.  Russia has over 75 million ounces of gold, one of the largest stashes in the world. Nobody knows China’s exact amount of gold—Beijing is notoriously opaque—but most observers believe it is even larger than Russia’s stash. Even if we take China’s official gold statistics—which almost certainly understate reality—Beijing’s gold holdings have soared by 17% in the past 17 months to around 73 million ounces. China’s recent gold buying spree unsurprisingly coincides with the US seizure of Russian assets in the wake of the Ukraine conflict and their dumping of US Treasuries.  | Ad | | Here's How to Profit from an Enormous Catalyst for Bitcoin Adoption | 
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