“One [longer term strategic issue] is very apposite today, and that is the future of the U.S. dollar as a reserve currency. At Bretton Woods, the dollar became the global reserve currency, backed by gold. A quarter century later, Nixon eliminated the gold backing for our currency.
Dollar hegemony has been central to our ability to basically go off the tracks fiscally and financially here. It has enabled us to avoid addressing all sorts of problems with which we’re now afflicted, and it has enabled us to avoid having financial discipline being imposed on us of the sort we have insisted be imposed on every other country under IMF (International Monetary Fund) guidelines.
The role of the dollar as a universal currency for reserve and trade settlement purposes is absolutely central to our international power and reach. Furthermore, we have used the fact that the dollar is an extension of our sovereignty to impose unilateral sanctions all over the place and to manipulate the global banking sector to enforce our policies, even when those policies — say, with respect to Iran — are not supported by others.
So we have a big stake in this, and when we get the dollar into trouble, as we have done, this is very, very fundamental. We now have China, Russia, Brazil, India, South Korea, at least, and very likely others, calling for the gradual elimination of the dollar as a reserve currency and its replacement by stages with something else — in the case of the Chinese proposal, with special drawing rights under the IMF.
I’ve seen this coming for well over a year, and have been talking about it. It’s now upon us, and it is not a problem you can send the fleet to solve. In the end, if you create a situation where people don’t want dollars, there’s nothing you can do about that. So I think this is a strategic issue.”
The end of dollar hegemony will make the debt we owe foreign governments, corporations and individuals real, which makes the payback real. Give the level of debt we have, that is a gargantuan thought. The end of dollar hegemony is the end of American hegemony, and that would impact a society which is as oblivious to real consequences for actions as we are.
Many Evangelicals are trumpeting that we are about to have a world currency to supplant the dollar, which is a necessary prerequisite to the end of history. Any currency that aspires to become the world’s reserve currency must have proper management and strong backing. At this juncture I don’t see that emerging. It’s one thing for countries and individuals to trumpet a new currency, it’s quite another to get them to agree to it. For nations to allow their own money to be supplanted, they would have to both have confidence in the new money and the belief that the new money would be better for them than the old.
Beyond that, proper management at the international “government” level is an oxymoron, and more people know that than will admit it.
If I were preaching, I’d focus my hearers on their heavenly country and its resources rather than watching the end times clock. But I’m just a layman…