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What Are Sactions?

Economic sanctions are a policy that one country can put on another that says “you can’t use our currency.” It’s a way for countries to boycott each other. Sanctions also means that people can also have their assets frozen or seized, if they have investments in the country that issued the sanctions.

The United States currently has sanctions against 37 countries, regions, and organizations. It’s one of the main weapons that the United States has in its arsenal. They can have devastating results, such as Venezuela where the value of the currency itself was less than the paper it was printed on.

The reason that US sanctions work so well is because the United States is considered the worlds reserve currency, meaning transactions anywhere in the world can be done using the US dollar. Money flows electronically all around the world (mostly in US dollars), Harvard professor and economist Benjamin Friedman called this flow of money the “Electronic Herd”. And when a country gets cut off from the herd, it can no longer trade with anyone using US dollars.

Being able to trade with other countries is a necessity. There isn’t a single country in the world who is currently self sufficient in all capacities, and does not require trade with anyone. Countries that are cut off from trading with the rest of the world, like North Korea and Venezuela (to varying degrees), have had horrible results.

Sanctions can be violated by corrupt banking officials who continue to operate with countries or organizations that have been barred from doing business in dollars. Those who violate sanctions often face even stricter sanctions.

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