De-dollarization in itself won't help.
“Well, that escalated quickly” was the meme that my mind reminded me of as I saw a fury of headlines, all coming from the past year or so, hinting toward either the rhetoric of prominent leaders or the policies at the center of which sits the goal of freeing the world from the dollar hegemony.
The highlights:
French President, Emanuel Macron, during his visit to China said that Europe has to reduce its dependency on the “extraterritoriality of the US dollar” as he reinstates his plan for attaining “strategic autonomy,” which, as he said, won’t be possible to finance “if the tensions between the two superpowers heat up.”
Last month, China and Brazil agreed to carrying out bilateral trade in their own currencies, removing the dollar as the intermediary.
Started in 2001 with a hope of transitioning the world away from the unipolar US hegemony, BRICS saw a list of countries - including Saudi Arabia, Iran, Argentina, Mexico, etc. - either applying or showing interest to join the alliance during the past months, not to mention that a top Russian official talked about having a new currency exclusively for the BRICS countries.
“Researchers from a Chinese state-run think tank have floated the idea of an Asia-wide digital currency with the aim of reducing its reliance on a United States dollar-based economy,” wrote CoinTelegraph in Oct 2022.
The Government of India announced that it would trade in rupee with countries that are facing the dollar shortage as a result of the Federal Reserve’s decision to raise interest rates to counter inflation at home.
And the list goes on and on…..
We see the faces of conservatives like Tucker Carlson meltdown as he covers the beginning of the ending of the dollar hegemony on his show:
“So Russia announced it will conduct business in Asia, Africa and Latin America in Chinese currency. Brazil, which as a brand new government supported by the Biden administration announced it will do the same thing... Pakistan is doing the same thing, that's a long-time US ally. India and Malaysia, two of the biggest economies in the world, announced they'll be settling their trade in their own currencies - not the dollar. Even France, which we liberated, is using Chinese currency in a new liquefied natural gas trade. China and Saudi Arabia are now major business partners.”
Of course, it is painful for American exceptionalists to see the countries joining hands to clean the geopolitical room from the dirt of unipolarity in a similar way that it hurts a bully to see the bullied ones getting together against their bullying.
After the WWII, the dollar’s reserve currency status set the path for the US to become the global superpower, and if there’s one thing that the US government has fought hard against in this century, it is to maintain the dollar hegemony, as evidenced by the fate of Saddam and Gaddafi.
The status that the dollar currently enjoys is the life and blood of the US empire, it enabled the US to be the Cyclops of the modern age. Being the issuer of the reserve currency of the world allowed the US to start pointless wars, sanction and starve the countries showing dissent against the geopolitical status quo, and a lavish lifestyle with almost no inflation when compared to other countries.
The US senator, Marco Rubio, explicitly stated the leverage that the US is set to lose if this campaign continues:
“We won’t have to talk about sanctions in five years because there will be so many countries transacting in currencies other than the dollar that we won’t have the ability to sanction them.”
If you are familiar with the horrors that the US has been able to foist upon other nations during the past decades, I can imagine that you are taking this development on a positive note. Of course, it’s a positive development as far as the geopolitical order is concerned but there’s one thing that needs to be avoided.
De-dollarizing the world just to place the throne on the head of another country’s currency and let it run the global financial system won’t make much of a difference, for the issue is not with which currency you give that much power to but with the act of giving that much power in one hand in the first place.
Even in your personal life, if you allow someone to have so much power over yourself or you get so much dependent on somebody else that he can literally starve you to death, then given the right circumstances and strong enough incentives he’s going to starve you to death. The worst thing, in those circumstances, you could possibly do is to try giving that power to some other person. You might think that you are doing some kind of rebellion but that’s no rebellion at all.
The way out of the dollarized world will not be, let’s say, yuanized or rubled world, but a geopolitical order where no country has the ability to hurt even one country with the whip of sanctions and endless wars with no economic consequences inside its borders.
The solution is either two countries trading with each other in their own currencies or the setting up of a regional or global currency whose policy is decided not by a single country but by every country that uses that currency.
This is the only way that current abuse of the power held by the global reserve currency can be stopped.
Of course, that world will be much fairer geopolitically than what we’ve got today.
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