Dollar imperialism, 2015 edition
by MICHÈLE BRAND and RÉMY HERRERA
IMAGE/Global Research
Paris.
“The dollar is our currency, but it’s your problem.” This is what US Treasury Secretary John Connally said to his counterparts in the Rome G-10 meeting in November, 1971, shortly after the Nixon administration ended the dollar’s convertibility into gold and shifted the international monetary system into a global floating exchange rate regime. The world has been suffering from this “problem” ever since the US obtained the “exorbitant privilege” of issuing the world’s reserve and trade currency under the Bretton Woods system after WWII.
The Fed effectively acts as the world’s central bank, but sets monetary policy only in its own interest. Under the pressure and the orders of financial oligopolies, it fixes interest rates and prints money to suit itself, sending economies across the globe into tailspins. When the Fed wanted to halt the decade-long decline in the profit rate and to pull the US out of stagflation in the late 1970s, it raised its rates sharply – the Volcker shock of 1979-1981, when the federal funds effective rate jumped to more than 20% at the beginning of the 1980s – throwing many developing countries into freefall, default and debt servitude. As their debts were denominated in dollars and rates jumped, suddenly they were paying drastically heavier debt service burdens, which they could only cover by taking out more debt under the draconian conditions of the IMF. In 1997, the US interest rate hike of only a quarter of a point was one of the main reasons for the “Asian crisis,” as hot money fled South-East Asia. Today in 2015, the end of QE, a strengthening dollar and an anticipated rise in US interest rates could wreak havoc in developing economies. Since 2009, trillions of dollars hot off the printing press or borrowed at near zero rates have been flooding into the global South and East. But today’s monetary tightening is already leading to an exodus of hot money that is destabilizing these countries, with the effect of keeping the United States’ rivals in the “emerging” world down.
Counterpunch for more
BRICS New Development Bank threatens hegemony of U.S. dollar
by JORDON TOTTEN
In light of China’s massive appetite for energy, Russia’s potential as a world-leading energy export, and both circumventing the dollar, the dollar’s reserve status is potentially dwindling. To combat this trend, the U.S must become a net exporter of energy. Investing in new energy solutions is imperative to compete in the future global market. And, if the dollar does depreciate, U.S. energy exports will be more competitive. The current U.S. net import makes it vulnerable to voracious energy giants like the opposing anti-dollar alliance. This negative export in energy is adding to the U.S. trade deficit, a deficit that has been coupled with the burden of holding the dollar as the global reserve currency.
Forbes for more