Seizing $300B of Russian Assets May Be a ‘Cataclysm’ for Dollar System, Nobel Prize Winner Says

Key Takeaways

• Confiscating Russian assets could destabilize global finance, leading to de-dollarization.
• Robert Shiller warns Biden to tread carefully on confiscation plan.
• Russia’s seizure of assets could spur adoption of alternative financial systems.

Nobel Prize-winning economist Robert Shiller has raised concerns about the potential repercussions of Western countries confiscating Russian assets on the stability of the dollar-dominated financial system.

Shiller cautions that such actions could lead to a significant upheaval, potentially paving the way for countries that use alternative financial systems or currencies to challenge the dominance of the dollar. .

‘De-Dollarization’ as U.S. Freezes Russian Assets

Robert Shiller, the 2013 Nobel Prize laureate in Economic Sciences, has voiced concerns regarding the potential impact of the confiscation of Russian assets, frozen by Western countries in response to the Russia-Ukraine conflict, on the U.S. dollar-dominated financial system. He urges the Biden administration to carefully consider the implications of such actions.

This scenario, he suggests , could undermine the current global financial structure, leading to unforeseen and potentially far-reaching consequences in international economics and politics

In a recent interview , Shiller warned that this move might lead other nations to perceive the U.S. as a less reliable partner.

They may fear that what is happening to Russia could happen to them as well, potentially undermining the United States’ position in the global economy. This apprehension could have significant consequences for the stability and strength of the dollar in international finance.

Shiller said :

“This will destroy the halo of security that surrounds the dollar and will be the first step towards de-dollarization, which many are increasingly confidently leaning toward, from China to developing countries, not to mention Russia itself.”

Shiller Warns of ‘Cataclysmic’ Consequences

Robert Shiller has expressed his view that the confiscation of Russian assets by Western countries could serve to validate Russian assertions of a proxy war, potentially leading to severe repercussions for the current dollar-dominated financial system. He described such an outcome as a “cataclysm,” emphasizing the gravity of the situation.

While Shiller acknowledges that confiscating these assets might be seen as “morally right,” he highlights the numerous uncertainties surrounding this decision. He advises that it requires thorough and careful consideration due to its potentially far-reaching implications.

According to the reports , the Biden Administration is actively urging allies, including Britain, France, Germany, Italy, Canada, and Japan, to devise a plan for seizing over $300 billion in Russian assets. This strategy aims to be in place before February 24, which will mark the two-year anniversary of the recent escalation in the Russia-Ukraine conflict.

In response, Russia, through its Bank of Russia governor Elvira Nabiullina, has indicated that while efforts have been made to safeguard reserves in non-U.S. seizable assets, the country is still endeavoring to recover the $300 billion at stake. This situation underscores the complex and tense dynamics in international finance and diplomacy arising from the ongoing conflict.