Is this finally a severe enough escalation for the UK to stop using the US dollar as a reserve currency?
If they only use sterling?
* - along five other central banks
The BoE does not even "print" the GBP (except paper/coins through the mint), never mind the USD. Money in the UK, like most countries, is created by banks through credit issuance (loans, mortgages):
* https://www.bankofengland.co.uk/explainers/how-is-money-crea...
Actually I see its 14 central banks that have this USD FX swap facility (but the BoE, ECB, and BoJ are essentially uncapped).
My sources:
1. I did some early work in a very early precursor of this with Reuters
2. The Bank of International Settlements (BIS) https://www.bis.org/speeches/sp230324a.pdf
3. The Federal Reserve Banks (Richmond) https://www.richmondfed.org/publications/research/econ_focus...
How it works is:
The BoE needs USD, say $10 billion, so it SIMULTANEOUS conjures out of absolute thin air a single ledger entry:
- GBP ₤ 7,437,400,000 - liability to US FED
- USD $10,000,000,000 - asset to UK BoE
It then:
- lends the $10 billion to whoever needs it in the UK
- later (so not immediately*) lets the Fed know it has a new GBP asset.
It later promises to pay it all back. If it can.
But, be very clear, 14 central banks, can and do conjure up USD out of thin air. They call it something boring ("FX swaps").
The modern fiat monetary system is weird. (And I want to be a bank).
But to my earlier point - this print on demand, let us know later facility is only needed because of the demand for USD.
> "Extremely dependent" seems to be overstating things a bit - 11% of imported gas comes from the US with is about a fifth of what we import from Norway and a third of domestic production?
If the GP wants to hold to his logic, then the US would be "extremely dependent" on Canada, given that 25% of all crude oil refined in the US comes from their northern neighbour:
* https://www.afpm.org/newsroom/blog/how-much-oil-does-united-...
Could the UK not rebalance its imports from LNG to more pipeline-based gas? It seems like the UK has managed to cut out Russian LNG imports completely already.
Rebalancing US cloud services out is impossible, though. That's the real UK economy kill switch.
The North Stream scenario could just repeat.