What the coming end of Dollar Hegemony means
Less than a week ago I posted an essay about the rapidly approaching end of dollar hegemony, but I didn't spend much time talking about its implications. It turns out that I was only a couple days ahead of the curve. Far better writers than I, such as Chris Hedges, have explored the topic in the past couple days.
This reconfiguring of the world’s financial system will be fatal to the American empire, as the historian Alfred McCoy and the economist Michael Hudson have long pointed out. It will trigger an economic death spiral, including high inflation, which will necessitate a massive military contraction overseas and plunge the United States into a prolonged depression.
Hedges quotes McCoy on how bad it will get, and the future he talks about is scarily close.
For the majority of Americans, the 2020s will likely be remembered as a demoralizing decade of rising prices, stagnant wages, and fading international competitiveness. After years of swelling deficits fed by incessant warfare in distant lands, in 2030 the U.S. dollar eventually loses its special status as the world’s dominant reserve currency.
Suddenly, there are punitive price increases for American imports ranging from clothing to computers. And the costs for all overseas activity surges as well, making travel for both tourists and troops prohibitive. Unable to pay for swelling deficits by selling now-devalued Treasury notes abroad, Washington is finally forced to slash its bloated military budget. Under pressure at home and abroad, its forces begin to pull back from hundreds of overseas bases to a continental perimeter. Such a desperate move, however, comes too late.
Faced with a fading superpower incapable of paying its bills, China, India, Iran, Russia, and other powers provocatively challenge U.S. dominion over the oceans, space, and cyberspace.
The collapse of the dollar will mean, McCoy writes, “soaring prices, ever-rising unemployment, and a continuing decline in real wages throughout the 2020s, domestic divisions widen into violent clashes and divisive debates, often over symbolic, insubstantial issues.” The deep disillusionment and widespread rage will give an opening to Trump, or a Trump-like demagogue, to lash out, perhaps by inciting violence, against scapegoats at home and abroad. But by then the U.S. empire will be so diminished its threats will be, at least to those outside its borders, largely meaningless.
In other words, we are going to see the ugly side of American politics (even uglier than today), but not a Mad Max Thunderdome dystopia. Just as importantly, we are only a few years away from this future.
It tells you that time is running out to prepare.
For those of you who doubt the danger to dollar hegemony, consider this article from last summer on CNBC by a strong dollar proponent.
All of those actions and others point to one direction: In the coming years the dollar will be facing a barrage of attacks with the goal of eroding its hegemony and the energy trading market will be one of the main battlefields where the future of America's economic dominance will be decided. Any successful attempt to delink commodity trading from the dollar will have a cascading impact not only on the global economic system as we know it but also on America's posture abroad.
But ignoring the growing anti-dollar coalition would be to America's detriment. Bull markets eventually come to an end and with a national debt of $21 trillion and growing at a rate of a trillion dollars a year, the awakening could be ruder and sooner than most economists predict.
In the midst of America's economic euphoria it is worth remembering that one of every four people on the planet lives today in a country whose government is committed to end the dollar hegemony. Thwarting their effort should be Washington's top national priority.
If you still don't believe in the danger to dollar hegemony, then your denial will be in for a rude awakening in the next few years.
All empires eventually fall, and we are traveling down a well-trodden path.
Finian Cunningham puts our current Venezuela coup policy into context.
Venezuela can thus be best understood as another phase of the US dollar’s historic demise, and the concomitant bigger demise of American global power.
...Again, however, the arrogant Americans are in danger of overplaying their hand. As with Washington’s aggression on so many other fronts – towards Russia, China, Iran, Europe – the American gross misconduct against Venezuela is augmenting the very direction it most fears: a multipolar world where US hegemony no longer prevails.
The configuration of chaos and conflict is a very dangerous one. The volatile mix could blow up into a global military confrontation. Washington’s desperation to avert its fate of demise could result in a one reckless aggression too far. A foolhardy invasion of Venezuela could be such a detonator.
Nevertheless, it is crucial to understand the present international precariousness as stemming from inherent American economic problems. That is the key factor that links up all the other seemingly disparate tensions and conflicts. Venezuela is but another demonstration of a wider structural problem centered on American capitalism’s collapse.
Our meddling in Venezuela isn't because of our strength, but because of our weakness.
Venezuela could be America's Suez Canal.
The thing is, unlike when Britain's currency hegemony ended, there is no obvious successor today. China, the 2nd largest economy, has an indebted, underdeveloped financial system, and no overseas military presence.
We would have to go back to the 17th Century to find a similar situation.