The Unspeakable Death of the ‘Almighty Dollar’

Welcome to the third episode of my ‘ignored news’ blog.

For some months the ‘specialist’ media have been tracking a major structural change in the world’s economy brought-on by the Ukraine War: Not the well-publicised crisis of food or energy prices; but of who controls the world’s financial payments system, and its use to enforce Western sanctions. Yet for some reason, the rest of the mainstream news just doesn’t seem interested in the consequences of this for every citizen of the affluent West.

As someone who has spent an unreasonably long amount of time protesting outside American military and intelligence sites, it’s always been clear to me that American power isn’t primarily cultural, or military: It’s economic. More importantly, it’s the power of the American state to make dollars ‘unobtainable’ – to ration people’s access to ready cash – which forces compliance to American hegemonic control¹.

The power of the dollar has, for decades², granted the USA not just global power, but also a more stable domestic economy as it controls the global trade system for its own self-interest: Between a third and a half of global trade is sold in dollars; about half of global debt is valued in dollars; and for that reason, 84% of foreign exchange transactions involve dollars, as countries or companies ‘buy’ or ‘sell’ dollars so that they can trade with someone else.

Now that system is faltering, in part driven by the conflict in Ukraine – and the ‘popular’ news media are seemingly oblivious to the significance of this.

The neo-colonial strangle-hold³ of ‘The West’ is based within it’s control over the global banking system. Yes, each country may have its own central bank and national currency, but when banks or states ‘settle’ payments between themselves they do so using reserve currencies⁴: Mostly dollars, sterling, or euros; traded mainly via banks who are regulated by the US or European states; and transferred electronically using digital networks controlled by Western states – such as the SWIFT network⁵. This not only means that Western finance institutions mediate global trade, they can also levy a ‘tax’ on global trade through the fees for reserve currency trading and payment transaction fees.

There are no UN-authorised sanctions against Russia because the UN cannot sanction any permanent member of the UN Security Council⁶ – which is what has permitted the US, Britain, France, Russia, and China, to abuse human rights and launch illegal wars for the past seventy years.

For that reason, what sanctions do exist⁷ are led by the US and the EU using their powers to control the international finance system. This has, historically, allowed ‘The West’ to exert its power over the rest of the world by economically strangling those states or companies who will not comply with Western foreign policy – irrespective of the position of, and often condemned by⁸, the United Nations.

The power of Russia as a global resource producer has enabled it to maintain trade with many states, reducing the direct effect of US and EU sanctions. Countries like India and China depend on those resources, and have continued to trade with Russia despite the protestations of ‘The West’. Now the EU is threatening⁹ sanctions against the states who continue to trade with Russia. Question is, are the actions of the US, UK, and Europe, beginning to undermine their historic economic power?

As part of the ‘Belt and Road’¹⁰ initiative, China has been opening-up its currency¹¹ to trade with nations it has partnered with. In March, China and Brazil concluded a trade deal¹² where both countries agreed to settle trade accounts in each other’s currency. By May, Russia, Bangladesh, Argentina, and Iran, had also announced¹³ they would begin trading goods in Chinese Yuan¹⁴.

The ‘BRICS’ nations¹⁵ – Brazil, Russia, India, China, and South Africa, considered by Western economists to be the ‘second tier’ of the world economic system – are now mulling over the idea of a common currency for trade. Our media has, thus far, singularly failed to explain the significance of this to the Western public.

As a former Whitehouse adviser stated¹⁶:

“It’d be like a new union of up-and-coming discontents who, on the scale of GDP, now collectively outweigh not only the reigning hegemon, the United States, but the entire G-7 weight class put together.”

Personally, I see this as a positive: It’s a measure which works to end the neocolonial influence of the worlds three-dozen-or-so¹⁷ affluent states. What it appears our popular media fail to realise, however, is just what power – in a resource-hungry world – the BRICS nations hold:

Before the Twentieth Century global trade had been mediated in gold or silver. That system broke down in the 1930s, to be replaced in 1944 with the Bretton Woods agreements¹⁸. This linked global trade to the value of the dollar. By the 1970s, as the American economy ceased to operate at a surplus to spread those dollars around, it fell apart – but the centralisation of global trade around the dollar, and some other reserve currencies, continued.

Until the middle of the Twentieth Century, via their colonial territories, Western states imported cheap resources, manufactured them into finished goods, and then sold them back to the rest of the world to close the economic cycle. Globalisation, and deficit economics, traded the economic power of Western states as consumers of finished goods with the cheap manufacturing economies of Asia – with Western companies still controlling a large portion of the world’s resource exploitation, and the financial system, to create profits which flowed back into the Western states.

Today much of ‘The West’ has similar problems to the US economy of the 1970s: Operating at a deficit; issuing debt to fund their national economies in reserve currencies; and then trading the value of those debts on the global money market, via their central banks, to keep the cash flowing to the rest of the world to buy goods.

For sixty years, Western states have effectively drained $2 trillion dollars a year¹⁹ from the rest of the world to fund their economies, paid for by the loss of value or income by the poorer nations of the ‘Global South’²⁰. These capital flows, supporting the affluent consumption of ‘The West’, are also innately linked to global ecological destruction²¹.

That is what might be about to end: The reality that, since colonialism arose in the Sixteenth Century, it has been the transfer of economic value²² from the Global South which has historically supported the ‘civilised’ lifestyle that denoted The West’s global supremacy.

Led by the BRICS states – who between them control not only a large proportion of the world’s manufacturing capacity, but also large amounts of the mineral resources required in digital and green technologies – a non-Western trade currency would cut Western economies out of that loop. Not simply the profits of primary resource production, or financial trading, but more significantly the ability to secure cheap tradeable debt from the world economy in order to fund national deficits.

Western politicians should be wise to this: For Britain and the US, especially, it has the potential to completely up-end the operation the national economy. Instead they’re stoking conflict with China: In effect facing-down the competing ambitions of other states by threatening first economic, and ultimately military force, in order to preserve their historic dominance over the world system.

In 2016, the once fêted but of late suppressed journalist, John Pilger, produced another one²³ of his insightful documentaries entitled, ‘The Coming War With China’²⁴. And one of the key reasons why that documentary is frowned upon, in ‘The West’ at least, is that it shows how America, as the world’s hegemon, has since Barack Obama’s presidency sought to paint China as a military threat²⁵.

Politicians in the US²⁶ are now openly talking about war with China. Some military figures believe it could be as soon as 2025²⁷. And with the Ukraine crisis being fuelled by Western states still pursuing the ‘Wolfowitz Doctrine’²⁸, that increases the chances of conflict with Russia.

For many political insiders and lobbyists this represents a ‘business plan’: The ‘threat’ of China is a reason for Western states to splash mega-bucks on new military technologies; which inevitably involves spending money on lobbyists and political donations. This might enrich the wealthy elite, but it doesn’t address the real global changes which are happening right now. If anything, it makes those changes worse through stoking conflict rather than pursuing diplomacy.

To bring this full-circle: America’s global network of hundreds of military bases²⁹ project US power, but ultimately it is economic power which drives the American military machine. America and Britain are now pushing an agenda of military force against China, just at the moment China is ‘weaponising economics’ the way ‘The West’ have done for the last seventy years.

It was the economic effects of the Vietnam War which broke the Bretton Woods system in 1971. Today it is the failure of neoliberalism and globalisation³⁰ which – reaching their effective peak – are breaking the global trade system. In all likelihood this will break the historic hegemony of ‘The West’, creating a multi-polar world which reorders the world trade and finance systems.

For most people, all this talk of conflict with China creates concerns about the availability of cheap goods. In reality it’s the availability of cheap debt, which funds their daily life, which is far less secure as the BRICS nations opt out of the Western economic system – and which, ultimately, will redefine the lifestyle of Western citizens as their historic hegemonic control of world trade and finance collapses.

Endnotes

1. Wikipedia: ‘Hegemony’.

2.The Economist:
‘The power and the limits of the American dollar’

3. Wikipedia:
‘Neocolonialism’.

4. Wikipedia:
‘Reserve currency’.

5. Wikipedia:
‘SWIFT’.

6. Wikipedia:
‘United Nations Security Council’.

7. Wikipedia:
‘International sanctions during the Russo-Ukrainian War’.

8. United Nations:
‘UN rights chief bemoans unilateral sanctions on Venezuela, fearing ‘far-reaching implications’’, 8th August 2019.

9. AP News:
‘EU takes aim at countries helping Russia to avoid sanctions’, 9th May 2023.

10. Wikipedia:
‘Belt and Road Initiative’.

11. Reuters: ‘China’s small steps on offshore use of yuan are starting to add up’, 27th April 2023.