Will the World Ditch the Dollar?
War, Empire, and the Global Movement Against U.S. Monetary Hegemony
Morning, All! Hope you had a great weekend. I’m excited to share a new article about the future of the US dollar that I researched and wrote with six undergraduate students last spring. I am truly delighted to have them with me in the byline. The article was published in Dollars & Sense over the weekend.
Here’s a short excerpt:
The U.S. dollar’s dominance in the global economy effectively positions the U.S. government as a middleman in every trade and financial transaction in which the dollar is used. And the dollar is used far more than any other currency in the world. These simple facts underpin many recent debates about “de-dollarization,” the process by which the dollar becomes less dominant in the global economy.
Toward the end of World War II, with much of Europe in ruins, the U.S. dollar was the strongest and most stable currency around. World leaders agreed at a 1944 conference in Bretton Woods, N.H., that the dollar should anchor the global monetary system, providing financial stability as the world recovered and rebuilt. The “Bretton Woods system” that emerged and was fully implemented by 1958 involved a “dollar-gold standard” in which the United States pegged the value of the dollar to gold, and then other countries pegged their own, domestic currencies to the U.S. dollar. The privileged status bestowed upon the dollar at Bretton Woods—what French finance minister Valéry Giscard d’Estaing famously later called an “exorbitant privilege”—has afforded the U.S. government, and the U.S. financial system more broadly, tremendous power over global economic and political affairs, and over the fates and fortunes of people across the globe.
Today, many scholars and pundits maintain that, despite the recent flurry of speculation to the contrary, there is no real threat to the dollar’s dominance. We humbly disagree. The dollar has been dealt a severe blow over the last 18 months owing to the Ukraine war and its surrounding context, a geopolitical shock that disrupted the more comfortable terrain on which the dollar previously rested. The dollar, and to a lesser extent the euro, have become targets of a growing international backlash to Western military, political, and economic dominance since the war began. Part of this backlash involves a wide swath of the non-Western world coordinating to reduce dependence on the U.S. dollar and develop alternatives that permit it to cut out Western monetary middlemen. This is the first time since World War II that so many countries with such combined economic strength have been so unified in their opposition to the U.S. dollar (and to a lesser extent the euro) and so determined in their efforts to establish viable alternatives to its position as an anchor of global financial and trading systems.
In the sections that follow, we first discuss the “old” view of international currencies and contrast it with the “new” view that informs our findings and conclusions. We then discuss global discontent with the dollar, the impact of the Ukraine war on the dollar’s legitimacy and reputation, and the alternative arrangements sprouting up to compete with the dollar in global trade and finance.
Read more on the Dollars & Sense website, here.
Thank you for this well explained research. I learned so much. Didn’t know I didn’t know. Congratulations to all.