Many countries are engaged in implementing mechanisms to weaken the dollar. They chase the prospect that the world can be better once the US currency loses its strength and hegemony.
China is pushing for a reduction in the use of the dollar in its economy, and also globally. The digital Yuan project, agreements with several countries to regulate trade and investment in their respective currencies are part of the dollar's counter -strategy.
The same strategy is as the Russian Federation that also aims at gradually scaling back the use of the dollar. The mechanism developed by the European Union to cushion the impact of the US sanctions on Iran is another example. Recently, there were signs of dollar weakening. It has lost strength against the euro, also due to the high level of debt in the US.
But for central bankers around the world, the dollar remains the reserve currency by excellence. According to data from the International Monetary Fund updated to the first quarter of 2020, the dollar holds a 62% share among reserve currencies while the euro is worth 20% and the Chinese yuan 1.9% and yen 5,7%. In any case, the dollar is always in demand, and no options loom on the horizon.
The United States mainly feels the positive effects of hegemony. However, the American ruling class is beginning to think that hegemony brings advantages but also disadvantages that polarize the economy and politics of the country. The impact also extends to an international level, creating economic and social imbalances that are not easy to manage and generating growing strain on a geopolitical level.
The United States was able to enjoy, thanks to the hegemony of the dollar, the privilege of borrowing money from other countries at low cost and somehow living beyond their means, but also playing the role of world economic engine by using its spending power.
The country's banking and financial system and big multinationals have benefited enormously. A financial and speculation-oriented economy has emerged. Work, especially jobs related to manufacturing, has paid a heavy price. As some analysts assert, the USA has not yet suffered from relative decline, and in fact, we can only speak of an American hegemony combined with the military and cultural one.
However, this has happened at the expense of American workers and the lower classes. A strong dollar prevented the expansion of the country's manufacturing base because American products cost more than the competition. This fact has pushed imports from abroad and has damaged American productions, especially those located in market segments with low added value.
This has generated a large deficit in the trade balance with foreign countries towards partners such as China and Europe, causing the gradual weakening of the country's manufacturing system and generating vast areas of unemployment and underemployment. In turn, the social discontent also reflected on the political choices that led to the election victory of the current President Trump in 2016.
In short, having a strong currency, which serves as a reserve for all countries in the world, has advantages including the chance of imposing sanctions rather than using force.
This strong currency can be employed as a weapon against geopolitical competitors as in the most striking case of Iran, but there are disadvantages.
As a matter of fact, the demand for dollars keeps high the US currency rate but at the same time makes life difficult for the American manufacturing system whose products are less and less price competitive. Tariffs are not enough to correct structural imbalances such as the negative deficit in foreign trade with Europe and China.
That is why the idea of an agreed or even unilateral desertion from dollar hegemony would not be an option entirely contrary to American and perhaps international interests.
The US Treasury Secretary told CNBC that it is in the national interest to keep the status of a world reserve currency, which the current administration does not intend to leave.
Such a choice is certainly not on the current political agenda. However, the international community and the US should consider the advantages it could generate for the entire world system, given the growing competitiveness that features China and Europe relations.
A unilateral or agreed desertion would have remedial effects on the current international trade structures. For example, the world of production and work would regain a central role by limiting the power of speculative finance, which generates many economic, social, and ethical problems in the Western world.
An agreed solution could see the biggest economies engaged in a multilateral process governed by the International Monetary Fund aimed at creating a basket of currencies to be managed by a third authority that would have the task of regulating them.
Otherwise, the US could decide to unilaterally leave the hegemony of the dollar by pushing the two main competitors to change their policies and focus on their economies, also rebalancing the international trading system. The profits of the financial system would probably be constrained. A system based more on work and production would come out, which would accelerate the emergence of an ethically sustainable economy and avoid a decline in globalization by countering protectionism.
A Note on Who Funds This Journal: We Accept No Advertising, No Government Grants and No 'Foundation' Grants
We Are An Independent Organization Publishing Independent Media 100% Funded by Our Members.
If You Are Not Yet a Member, You Can Join Immediately:
Full (or Fellow) Membership in the BWW Society/Institute for Positive Global Solutions puts a high emphasis on perceptive minds and each person's capability to see beyond general, sterile, politically correct views. It focuses on those whose open minds reflect the determination to break down the monopolistic sledgehammers of the lobbies that would have the world see things as they do and in their own interests.
Membership is available only to people with the qualifying criteria described above, and papers submitted for publication in the Society's journals must be of a high standard and meaningful to academic and layman alike where possible.
Because of this, many view membership in the BWW Society with a marked degree of significance in their lives, and as a pathway to a statement of their dissatisfaction with what has been going on which has led to global social and political instability, heading for general chaos, massive upheavals in populations and seemingly endless wars.
For many, the hope that their intensive effort might just find the right readers in the right places to carry their thoughts through, is of itself a beacon in their lives.
BWW Membership not only reflects each Memberfs commitment to the future but their high standing as an independent thinker.
Your dedication to presenting solid solutions to global challenges which are so sadly lacking in our overcautious institutions with their intrinsic fears, is a much needed effort worth cultivating. Our platform -- based on the crucial interchange of ideas, across the board from great scholars to fine lay minds -- is a valid, purposeful instrument for innovation and free thought. BWW Membership reflects not only each Member's commitment to the future but their high standing as an unrepentantly independent thinker.
With all of the above in mind, you are invited to join us and Register your Membership for the current term:
As a Member, you are also encouraged to submit articles, papers or commentary pieces for inclusion in our publication, the Journal of Global Issues & Solutions. Finer readers would be difficult to get together in any one place.
We need every support we can get to continue with the movement and your own is another spark in this ambitious project which only you can realize at this moment in time.
The BWW Society/Institute for Positive Global Solutions is an international interdisciplinary multi-cultural forum based on the exchange of free thought and creative ideas, and stands as a challenge to the regimented, politically correct presentations we see too much of today.
Membership is comprised of academics, business leaders, physicians and researchers, scientists, artists, writers, civic leaders, theologians, professionals, and others whose forward-thinking minds and innovative thoughts are brought together as a collective conscience for the breaking out of our constrained and restrictive societies.
You are invited to join today via the link below:
 https://www.foreignaffairs.com/articles/united-states/2020-03-31/comeback-nation; https://asiatimes.com/2020/08/declining-dollar-declining-america/?mc_cid=45ea02f27e&mc_eid=ab1f7b5ebe;https://www.economist.com/finance-and-economics/2020/08/08/dollar-dominance-is-as-secure-as-american-global-leadership;https://www.wsj.com/articles/fed-federal-reserve-jerome-powell-covid-coronavirus-dollar-lending-economy-foreign-currency-11596228151;https://asiatimes.com/2020/08/the-eurasian-century-has-already-begun/?utm_campaign=Asia%20Times%20Weekly%20Aug%2029%20%28X6xeGY%29&utm_medium=email&utm_source=ATF%2FAT%20Combine%20Weekly&_ke=eyJrbF9lbWFpbCI6ICJhbGJjb3NAYWxpY2UuaXQiLCAia2xfY29tcGFueV9pZCI6ICJKR2V2cXAifQ%3D%3D;https://www.economist.com/schools-brief/2020/08/29/global-trades-dependence-on-dollars-lessens-its-benefits ;https://asiatimes.com/2020/08/declining-dollar-declining-america/?utm_campaign=Asia%20Times%20Weekly%20Aug%2029%20%28X6xeGY%29&utm_medium=email&utm_source=ATF%2FAT%20Combine%20Weekly&_ke=eyJrbF9lbWFpbCI6ICJhbGJjb3NAYWxpY2UuaXQiLCAia2xfY29tcGFueV9pZCI6ICJKR2V2cXAifQ%3D%3D; https://www.project-syndicate.org/commentary/us-dollar-position-as-global-reserve-currency-over-short-and-long-term-by-nouriel-roubini-2020-08