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According to Mike Novogratz, the United Statesβ control of the seas enables it to maintain the dollarβs reserve currency status. Novogratz suggested that the U.S. and United Kingdomβs joint strikes on Yemen were necessary because they give residents the βbenefit of borrowing endlessly at low rates.β
Impact of Attacks on Commercial Ships Passing Through the Red Sea
Mike Novogratz, the billionaire and CEO of Galaxy Digital, has stated that the U.S. dollarβs reserve currency status is the reward that the United States receives in exchange for controlling the seas. According to the billionaire, maintaining this status costs the U.S. approximately $1 trillion, which is equivalent to around 4% of its GDP.
The country that controls the seas has always been rewarded reserve currency status. It costs the USA approx 4% of GPD to keep that rank. It gives us the benefit of borrowing endlessly at low rates. The actions in the Red Sea are very appropriate in this context.β¦
Novogratz, a supporter of United States President Joe Bidenβs Democratic Party, made these remarks just after the U.S. and the U.K. launched missile strikes targeting regions of Yemen reportedly controlled by the Houthis. The strikes on the Houthi rebels followed a surge in the number of attacks on commercial ships passing through the Red Sea.
The growing attacks have forced some shipping companies to suspend or avoid using the Red Sea altogether. This, in turn, has not only led to an increase in the cost of moving goods by sea but has caused shortages of both raw materials and finished products. For example, Teslaβs mega factory in Germany was recently forced to pause production due to delays in the delivery of parts.
After initially refraining from launching a large-scale response to the attacks on ships, the U.S. and UK responded to the Houthi rebelsβ latest provocation by striking 30 targets inside Yemen on Jan. 12. The strikes have, however, reignited fears of a wider regional war.
Cost of Borrowing
Meanwhile, in his Jan. 12 post on X, Novogratz implied that the strikes are necessary if U.S. residents are to continue borrowing at very low rates.
βThe country that controls the seas has always been rewarded reserve currency status. It costs the USA approx 4% of GPD to keep that rank. It gives us the benefit of borrowing endlessly at low rates. The actions in the Red Sea are very appropriate in this context,β Novogratz said.
In response to the post, some of Novogratzβs followers on X expressed shock at the billionaireβs endorsement of the bombing. However, one user warned Novogratz of the U.S. dollarβs declining dominance.
βThe time for American hegemony will soon be at an end. We have enjoyed three decades of unrivaled premier status in the world and now find ourselves in a multipolar world. I am thankful for Bitcoin,β said the user.
However, another user dismissed Novogratzβs theory and went on to point out that Germany and Japan have lower interest rates yet they are not part of the Yemen bombing campaign.
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