Defeating the Dollar - Defeating the United States: How to End the Hegemony of the American Currency

On October 4, US President Joe Biden, speaking at the White House, announced the potential threat of default looming over the United States. According to him, if the US Congress does not raise the country's national debt ceiling in the near future, it will jeopardize the current position of the dollar as the world's reserve currency.

This situation is unfolding against the background of the blocking by the Republicans of the adoption of the bill to increase the national debt in the lower house of the American parliament. A principled position on rejection of the new law is expressed, in particular, by the leader of the Republican minority in Congress, Mitch McConnell.



As a result, the United States, at first glance, faces a serious threat of inability to pay its obligations. If you remember how devastating the impact of the 1998 default on our country was, you might think that the American economy really is on the brink of disaster.

However, if you look closely at the details, it becomes obvious that an old theatrical production called "The USA is running out of money and they pretend not to print it" is once again being played in front of us and the whole world. And there is essentially no real risk for the economic collapse of the United States. However, about everything in order.

"Dollar crash"

Many documentaries have been filmed about the expected future collapse of the dollar, which is about to happen, and various economists and analysts regularly broadcast about it, and yet despite the steady growth of the US national debt, it is the American currency that remains the key world reserve currency.

So, according to the IMF, in the fourth quarter of 2020, the dollar took first place in the foreign exchange reserves of the central banks of the world with a share of 59%. In addition, the American currency occupies a leading position in the world and in popularity within the international interbank SWIFT system. According to data for August 2021, the share of the dollar in international settlements exceeds 40%, while the closest competitor, the euro, has about 38%.

Nevertheless, it is already becoming obvious that the single European currency is gradually exhausting its potential for expanding its influence, and its further development will most likely be limited by the economic growth of the eurozone. At the same time, the "American", undoubtedly, having lost some of its popularity in the framework of the wave of de-dollarization, remains the strongest world currency, a kind of standard for the reliability and convertibility of the monetary unit for different countries.

Alas, in such conditions it is simply not possible to say that the dollar will collapse soon. For the guarantee of its stable existence is not only world trade, which is most often conducted in dollars, but also all those states that trust their national reserves to the American currency.

Of course, if all of them start to get rid of the dollar at once, then its reliability will predictably collapse following the exchange rate, but practice shows that even in conditions of serious macroeconomic shocks (the global financial crisis of 2008-2013, a pandemic), such behavior should not be expected.

Cynicism as a lifestyle

Returning to the topic of the size of the American national debt, it is worth noting that experts once said that debt obligations of $ 10 trillion would inevitably lead to the collapse of the American financial system.

Today, the total US national debt exceeds this figure by almost three times, and de facto, the only destabilizing factor concerning it is the formal approval of an increase in its ceiling, which in fact is more a subject of political bargaining between Republicans and Democrats than a real issue.

The scenario for raising the national debt limit is always approximately the same: the United States first inflates the national debt to a value close to its maximum legal value, and then Congress begins to pass a bill to raise it.

However, this procedure has become so obvious that it has set even the American statesmen themselves on edge.

For example, two years ago, the previous President of the United States, Donald Trump, apparently simply decided not to bother and sign a law on an unlimited increase in the American public debt for the period until July 31, 2021.

It's that simple - you just take and print as much money as you need. Why unnecessary worries?

As a result of such a cynical policy the world today is stuck in dollars like in quicksand. Against the background of the volatility of many local currencies and the availability of a huge dollar money supply, circulating around the globe in cash and non-cash forms, the "American" looks like a reliable alternative not only for mutual settlements between countries, but also as a means of accumulation and payment at the household level.

One does not need to go far for an example, it is enough just to remember the 90s in our country, when the dollar almost surpassed the ruble in popularity in Russia, which was well known in the same USA. It is significant that the very first foreign flight from the United States with freshly printed one hundred dollar bills of a new design in 1996 went to Russia.

Of course, the root cause was then primarily in the instability of the financial system of our country, which had begun to transition to a market economy just five years earlier. However, even realizing this, it is difficult to close our eyes to the fact that such an open circulation of the dollar in our country was perceived overseas as another success of its financial system.

Thus, it is time to admit that in the current economic structure of the world, the collapse of the dollar as part of the continuation of the current policy of gradually increasing the US national debt looks so unrealistic that it should not be considered as any promising opportunity.

However, this does not mean that countries that do not agree with the objectively unfair dominance of the dollar should come to terms with the current state of affairs and allow the United States to continue to live at the expense of the rest of the world. It is high time to change the world financial system, it is only important to find suitable tools for this and hit right on target. As Archimedes said, "give me a point of support, and I will turn the Earth."

The distorting mirror of global finance

After all, the world financial system today really looks monstrously disproportionate and unfair, if this word is generally applicable to economic relations.

For example, according to the same SWIFT, this August the Russian ruble became one of the twenty most popular world currencies. The domestic currency has shown its best result over the past six years in terms of the volume of international interbank settlements - 0,18%. Yes, zero point, eighteen hundredths of a percent.

At the same time, Russia is the sixth economy in the world in terms of GDP, calculated at purchasing power parity. A country actively involved in the world economy and global supply chains. Nevertheless, the share of the ruble in international settlements is less than two tenths of a percent, and this is also considered a good result.

What other confirmation is needed that the current distorted financial picture of the world needs to be changed?

It is only important to understand that it is no longer possible to do this using traditional methods, which conservative bankers love to use so much. It's like playing at the same table with a sharpie who has not one, but a whole deck of jokers up his sleeve.

The world needs a fundamental and radical change in the financial paradigm. Comparable with the collapse of the Bretton Woods system of organizing monetary relations in the 70s of the XX century, which eventually led to the strengthening of the role of the dollar. The concept of fiat money, that is, unsecured money, once conquered the world, and it is to it that the American currency owes its current status. However, this does not mean that the development of the financial sector stopped there. Where the question is about money, usually something new appears.

New technologies against the old monopoly

This “new” industry today is the fintech industry, whose growth is breaking records all over the world. At the junction of the technological and financial sectors, literally before our eyes, a new sphere is emerging, which, as the top managers of large credit institutions, including Sberbank, note, "is designed to replace traditional banking in the coming years."

Nevertheless, fintech is more of a tool that is also developing in the United States itself, so it would be naive to expect that with the help of it alone it would be possible to deprive the dollar of leadership.

There is another innovative technology, which, despite widespread media coverage, is still in its infancy. Today, cryptocurrencies as a concept are objectively the only thing that can oust the dollar from its throne and, accordingly, the United States from the position of the world financial hegemon.

Today, cryptocurrencies are developing without government participation, which causes a number of problems inherent in all new financial technologies: a low degree of trust, a high degree of risk, and low prevalence.

The aura of get-rich-quick, sometimes associated with sharp fluctuations in rates and fraud (cryptocurrency exchanges often close along with clients' assets) greatly impairs the image of cryptocurrencies. At the same time, the revolutionary nature of the blockchain technology that underlies them is openly viewed by many economists as the foundation for the economy of the future.

Maxim "divide and conquer" in the event of the creation of an official state cryptocurrency will have to turn into "decentralize and manage". And Russia is currently presented with an excellent opportunity to put it into practice.

So, in accordance with the Strategy for the Development of the Financial Market of the Russian Federation until 2030, presented in mid-September 2021 jointly by the Central Bank and the Ministry of Finance, the third form of means of payment issued by the Central Bank after cash and non-cash money, the digital ruble, will become a key project in the field of digitalization in Russia. in the coming years.

Progress is evident, as is a clear commitment by a key economic agency and monetary authority to keep up with the times.

Nevertheless, in order to truly outperform other countries and make the Russian currency not only more popular, but also somewhat exceptional, Russian economists should think more ambitiously and on a larger scale.

For example, what prevents Russia from creating a special economic zone (in fact, offshore) and launching on its territory the circulation of a new, completely digital currency, the rate of which is guaranteed by the Russian state?

At the same time, this currency will not be subject to inflation - the scourge of fiat money, and will also be easily convertible into the Russian ruble at any time in any Russian bank. In addition, it can be exchanged for bitcoin, ether and other cryptocurrencies, of which there are now hundreds, if not thousands. And despite the volatility of the latter, the Russian digital currency will not lose its purchasing power, i.e. its value will grow steadily.

In fact, this will create a precedent that will immediately attract additional attention to the digital currency of the Russian Federation and at the same time increase the share of the ruble in international settlements. All these years, the lion's share of transactions with cryptocurrency financial instruments has passed through the dollar. Nevertheless, neither the US government nor American legislation unequivocally regulates even the very concept of cryptocurrencies, let alone transactions with them.

The same Pavel Durov, who founded the TON blockchain platform and attracted multibillion-dollar investments for its launch, was forced to completely close this project only because of the decision of the American court. As a result, investments had to be returned, and huge losses had to be compensated at their own expense.

In fact, the US authorities banned the distribution of Durov's new cryptocurrency not only on its territory, but throughout the world, citing the fact that "a US citizen can find some way to access the TON platform after its launch."

First, this decision violates the state sovereignty of countries that have the right to independently determine monetary policy.

Secondly, it violates the rights of citizens of these countries, which have nothing to do with the United States.

Thirdly, it looks rather strange. For example, online poker and other online gambling have long been banned in the United States. However, this did not force the American government to seek the shutdown of online casinos around the world, and they quite calmly worked in the jurisdictions of states with less stringent legislation. At the same time, for some reason, it was the launch of an innovative cryptocurrency platform by a Russian entrepreneur that caused a sharply negative reaction from the American leadership, which led to its closure.

Is it because it was cryptocurrency platforms that began gradually, step by step, to take away only a fraction of a percent from traditional means of payment, including the dollar?

Of course, it is objectively impossible to compete with the American government, even if it is a large-billion-dollar business project. But what if such a platform was created by the Central Bank and the Russian Federation stood behind it?

Of course, certain aspects of the cryptocurrency economy are still too difficult for even the world's leading economists to understand, but one thing is certain: if the United States is trying by any means to cover up an obviously legitimate major initiative in the field of international finance, it means, in their opinion, to them, or rather dollar, somehow threatens. And it is in this area that our country needs to continue its work.

After all, Russia is too big a power to take the current state of affairs in the global financial market for granted. Stop playing by someone else's rules, it's time to impose your own on the world.

Winning the Dollar = Winning the United States?

A victory over the hegemony of the dollar in the world market will first of all mean a victory over the hegemony of the United States. Now it is already obvious. After all, it is on the popularity of its own currency that the power of the United States is largely based. For example, over the past twenty years, the US national debt has grown by more than $ 22 trillion. At the same time, the total defense costs of the regularly waging war and spending $ 317 million a day in Afghanistan alone, the Pentagon over the same period amounted to about $ 12,5 trillion. As a result, the flow of endlessly printed dollars is essentially providing the US with a free army with the largest military budget in the world.

Thus, it is important to understand that what the United States is doing with the global financial system today is not just domination, but a real occupation. And Russia, along with other advocates of de-dollarization, needs to make every effort to throw off these shackles.

This is what will make it possible to deprive the United States of its most important support - its practically bottomless pockets. And it is already obvious that without the factor of financial doping, most of the US foreign policy ambitions will be simply unrealizable, and the influence of the United States on geopolitics will sharply decline and is unlikely to ever be the same.

There is little to do - to use state sovereignty, rely on innovation and achieve the set goals. If Russia could agree on the creation of the Durov platform within its jurisdiction and promote it as stubbornly as Nord Stream 2, then the picture on the international financial market would undoubtedly be different.