Tag: US Dollar

Monetary Order and International Security

September 9, 2021

Historically, there have long been close parallels between the collapse of monetary systems and the fall of global security orders. Hegemony requires a sound financial basis and global credibility – assets that can evaporate much faster than anyone in power cares to admit.

The nineteenth-century global order had been built around British imperial power, with the gold standard serving as its financial foundation. The gold standard was sustained by the expectation that even if it was suspended in times of war, the end of hostilities would allow the currency to return to its pre-war gold value. That promise of a constant gold value provided an element of credibility that made it easier for a wartime government to borrow, and thus to bear the cost of the conflict. 

https://www.project-syndicate.org/commentary/us-afghanistan-defeat-recalls-nixon-shock-british-end-of-gold-standard-by-harold-james-2021-09

To End Forever War, End the Dollar’s Global Dominance

August 12, 2021

In its laser focus on military restraint, the present debate about endless war overlooks the financial architecture of U.S. empire.

To keep Iraq amenable to a U.S. presence, the State Department turned to the United States’ “dollar power”—its vast control over the supply and distribution of the dollar, the global reserve currency—and threatened to cut off Iraq’s access to its Federal Reserve account, which would effectively paralyze the government’s ability to provide basic services. Faced with this threat, which according to one Baghdad official “would mean collapse for Iraq,” Iraqis have backed away from their call to banish U.S. troops. The American military looks set to remain in the country indefinitely.

https://newrepublic.com/article/156325/end-forever-war-end-dollars-global-dominance

The world’s money transfer system is China’s Achilles heel in its sanctions battle against the US

August 10, 2021

But China is actually far more vulnerable to US sanctions than it will let on, even if the sanctions are aimed at individuals and not banks. That’s because the primary system powering the world’s cross-border financial transactions between banks, Swift, is dominated by the US dollar.

https://qz.com/1893235/swift-transfer-system-leaves-china-vulnerable-to-us-sanctions/

Bretton Woods Revisited

August 10, 2021

Good history of the US Dollar system and its implications

The way the modern system works is that money has network effects, and the US is a large economy with an extraordinarily well-developed financial sector, so any asset is priced in dollars by default. Bilateral trade between non-dollar, non-Euro countries countries is usually done in dollars, so a 1% increase in the value of the dollar leads to a 0.6-0.8% change in trade between all other countries.

https://diff.substack.com/p/bretton-woods-revisited