Broader context of US dollar and sanctions: Describing #FATCA as one (of many) example of how the US uses control over the US dollar as a way of sanctioning other countries. "Uncle Sam just used its financial nuclear weapon again" https://t.co/xVa8jhI8fc via @thesovereignman

— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020

Introduction

There have been many articles on Brock and other sites about FATCA. The above tweet references a recent article at Sovereign Man which mentions FATCA in the context of a series of financial sanctions the U.S. has imposed on the world. In general, the article explains that it’s the dominance of the U.S. dollar and NOT it’s nuclear weapons that gives the United States the global power that it has. Interestingly the article pegs 2001 as the time when the United States began to use the world’s dependence on the U.S. dollar as a mechanism to impose sanctions on other nations. The “Sanction Principle” has been (unintentionally) reinforced by Juan Zarate in his book “Treasury’s War” (in which he proudly describes the relationship between the U.S. dollar and financial sanctions). Of course U.S. citizenship-based taxation, (and the power given by the FATCA IGAs to allow the U.S. to designate any individual as a “U.S. Person”), is the ultimate sanction against the rest of the world.

The U.S. Dollar As The Dominant Reserve Currency

Episode 553: The Dollar At The Center Of The World https://t.co/9WeBWPhedj

— U.S. Citizen Abroad (@USCitizenAbroad) January 16, 2020

The root of the dominance over the world financial system was the 1945 Bretton Woods Summit (well described in the NPR episode) in which the U.S. dollar became the world’s reserve currency. One wonders whether the use of a nuclear bomb to end the second world war was what placed the U.S. in a leadership position that allowed the U.S. dollar to become the weapon that it is today. Does military dominance reinforce the dollar? Or does the dollar reinforce military dominance. Or is it both?

The Sovereign Man article begins with:

In August of 1945, the United States became the only country to drop nuclear bombs on an enemy.

Hiroshima and Nagasaki were largely destroyed in the blink of an eye. And the Japanese had no choice but to surrender to the Allies, finally ending World War II.

Ever since, world superpowers have been rapidly advancing weapons technology, constantly raising the bar for destructive power.

It won’t surprise you to find out that the most powerful and destructive weapon in the world, though, by far, is claimed by the United States.

But this weapon has nothing to do with America’s nuclear arsenal. It doesn’t even require bullets.

I’m talking about the US dollar.

and ends with:

Remember, America only has this power because there is no alternative to the US dollar. Not yet.

But people can only be threatened so many times before they start working on a solution.

In many respects it’s already happening. Countries like Russia and China are already engaging in trade with one another without the use of US dollars. And more and more governments are starting to hold Chinese renminbi as official reserves.

So far these actions have barely dented the US dollar’s dominance, so there’s not going to be any major change for at least the next several years.

But the world is definitely moving in that direction. They’ve learned that the US government is happy to weaponize its currency… so, fool me twice, shame on me.

Having the world’s dominant reserve currency is an enormous privilege that provides many economic benefits. And it has changed many times throughout history– from the Roman solidus to the Spanish real de ocho. It never lasts forever.

And at some point in the future when the US loses its dominant reserve status, historians will look back and realize they did it to themselves.

What’s FATCA Have To Do With It?

The FATCA IGAs have been imposed on the world because of the dominance of the U.S. dollar as the reserve currency. Court challenges to FATCA and the FATCA IGAs (Canada, the U.K., France and hopefully more) are challenges to the use of the U.S. dollar (coupled with citizenship-based taxation) as a way to sanction the world.

In describing sanctions, Soverign Man notes:

In their efforts to track down terrorist organizations and obtain intelligence, the Treasury Department began strongarming foreign banks to hand over financial information about suspected terrorists by threatening to revoke access to US dollars.

The threat worked. And a new weapon was born.

In 2010, they made some serious upgrades when Congress passed the Foreign Account Tax Compliance Act, known as FATCA.

FATCA forces EVERY foreign bank and financial institution IN THE WORLD to share information about their depositors with the Treasury Department.

And if these foreign banks refuse to comply? You guessed it. They’ll lose access to US dollars.