It might sound like mission impossible, but accelerating de-dollarization might lead to substantial changes in the US political scene
Is de-dollarisation the last stage of the US empire’s dismissal? Let’s list some of the primary reasons that the US became the world’s biggest economy and still is the world’s biggest and most dominating economy:
- World War I
- World War II
- The creation of the “Petro-Dollar” and the US dollar is the world’s “reserve currency.”
- A geographical position resulting in not having a war on its territory since the Civil War
- Ability to attract young, talented and often well-educated people from all over the world.
Two world wars fought abroad turned the US into an industrial and financial superpower. All the major industrial competitors were in ruins, and the US manufacturing enjoyed all benefits of a war effort (development of the military-industrial complex). After the war, US manufacturing and financial services were the backbone of the rebuilding of Europe and Japan. USSR could challenge it in some spheres but stood no chance in challenging it as an economic and financial power. Getting migrants that could help all that develop in scientific and educational spheres was provided by the above factors. What could go wrong?
The already established position of being the leading currency in the world (if not entirely “reserve currency”) was cemented by the introduction of the “petrodollar”. Many see it as the crowning moment of the new empire that will outlast all others from the past. Was it? I am not sure anymore. It could be the move that will cause the empire to crumble.
Printing is easy
The introduction of the “petrodollar” made the US dollar the only currency that was treated as some sort of commodity. Everyone who wanted oil (meaning 99% of countries) had to buy the US dollar first. This was the first currency that had ever achieved that status. Blessing? Maybe. Maybe not! Is it possible that the petrodollar and the US dollar’s reserve currency status have similar consequences to the “resource curse”? It might be. Let’s simplify it – Why bother with manufacturing if you can print your currency and sell it to others at a very high price?
The “resource curse” refers to countries that underperform economically, despite benefitting from valuable natural resources.
There is no question that the USD dominates global finance. About 85% of all transactions in the worldwide Forex market of 6 trillion dollars daily involve the US currency. Central bank reserves are comprised mainly of dollars. Global debt is primarily denominated in dollars. The US can carry trade deficits of $100 billion a month, and the currency gains strength against other currencies. The Fed has begun raising interest rates, attracting foreign capital to the US as the greenback is considered a safe-haven currency, although the US federal debt ($31.2 trillion and rising) to GDP ratio is 121%!
It is an anomaly that a country with an annual budget deficit of $1.2 trillion and annual spending of $6.1 trillion still needs credit. One can hardly be surprised that current inflation is relatively high. The question of how long the USD can maintain its position should be asked. Many are starting to ask that question, and the answer is becoming more apparent – de-dollarisation might be the only way to avoid economic disaster.
De-dollarisation is slow but accelerating and becoming inevitable
For decades the rest of the world was happy to play by the rules making the US dollar reign supreme over other currencies. We don’t know today anything that we did not know for decades. Everyone knew the “reserve currency” ‘s role in The US economy. However, nobody (or at least not many) complained. It was part of the system that looked stable and predictable. Why is it starting to change now? The best word to explain it is ARROGANCE, followed by GREED.
The US somehow lost the ability to have meaningful economic policies. From “trickle down” at home to sanctions and more of the same abroad. The “trickle down” resulted in growing poverty inside the country (the opposite of China), and excessive sanctions against a fast-growing number of countries are pushing to self-isolation (rather than isolating the “enemies”).
Even before the beginning of the open conflict in Ukraine, there was a movement away from the USD. The rise of China as a global financial power meant that some global debt was denominated in yuan rather than dollars. Russia had begun a process of depending less on the US currency. Iran had long been subject to sanctions that prevented it from sourcing dollars for trade. Even the US allies as the EU were constantly threatened by sanctions if they decided not to follow unilateral (therefore ILLEGAL) US sanctions against third countries. Nobody could feel safe and out of the arrogant American government firing range.
De-dollarisation led by Russia and BRICS
After February 2022, the sanctions imposed on Russia by the West resulted in Russia practically being cut off from the dollar economy. This has led to the creation of a market that avoids the use of dollars. The BRICS countries have discussed various possibilities for creating an alternative international currency.
It is widely known that the petrodollar system depends mainly on the Saudi insistence on receiving payment in dollars, like many other major oil producers. The relations between the Kingdom and the US have deteriorated and are at their lowest level ever. Due to nothing else but ARROGANCE. If the Chinese and Russians succeed in weaning Saudi Arabia away from the US, there could be significant changes in Forex markets as there would be a lot less demand for US dollars.
The fact is that it is not only Russia that has taken a liking to de-dollarization. Brazil, China, India, Iran, Libya, North Korea, South Africa, Syria, Cuba and Venezuela are all interested in de-dollarization. Often for different reasons. The Ukraine conflict has accelerated the movement away from the USD and prepared the way for the creation of an alternative or alternatives to the American currency. We may now witness the process of creating a bipolar financial world where the USD area is confronted with another exchange system in the East and South. Australia, Canada, the EU, Israel and New Zealand constitute, along with the US, one bloc that is separate from the rest of the world.
The current US political establishment and structure cannot find a long-term solution – Is it time for a “regime change”?
The US Dollar is unlikely to collapse soon as the primary global currency. However, it will not be able to maintain the parasite “economy” that the US is having now. Once the US dollar loses the ability to be traded as a commodity as the disappearance of the “petrodollar”, the ability to print it indefinitely will be taken away. The US government is aware of this, and is taking some steps to re-industrialise. However, these steps might lead to the US self-isolating from allies in the EU. If that happens, the US might find itself as a leader of the “five eyes” only. In financial, political and military terms. Two significant reasons for that result are ARROGANCE and GREED.
The US is too big to suffer externally initiated “regime change”. That can be ruled out without much thinking. However, the long-term consequences of de-dollarisation could push the voters to start looking for solutions outside the two-party political system, which is one of the most corrupt power structures in the history of the world. Yes, I dare to say that The US is more corrupt than Cambodia (I lived there for five years) and even Ukraine. Their “defence” spending is the most significant corruption plot ever.
The long-term consequences of de-dollarization will mean less demand for dollars and a fall in the value of dollars in Forex markets. This will mean increased import costs, resulting in the further impoverishment of American workers already burdened with the impact of inflation. Wages will not keep up with the increase in inflation.
The entire process will probably be gradual. However, one cannot rule out black swan events and a faster de-dollarisation rate. Will this class division (which is already at the worst level ever), combined with other divisions (cultural, ideological, racial, et. c), lead to internal conflicts or even revolution? I would not rule it out. What do you think? Please feel free to let me know.
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