2023-06-01 07:36:00
Is the hegemony of the dollar, as the standard currency of world economic exchanges, threatened? French economist Jacques Attali announces this on his blog, prophesying a major financial crisis in the second half of August of the year: “The world situation is only held together today by the strength of the dollar, itself legitimized by the economic, military and political power of the United States, which remains the first refuge of capital in the world. However, they are now threatened by a very serious budgetary, financial, climatic and political crisis: the American public debt has reached 120% of GDP […] Private debt is not in a better state: it has reached 16,900 billion dollars, i.e. 2,750 billion more than before the Covid-19 crisis; i.e. $58,000 per American adult; or even 89% of the disposable income of American households. […] Unsustainable system. 13% of these loans are already in default and this ratio is increasing every day; moreover, the rise in rates will increase the pressure on these poor borrowers…”The Belgian economist Bruno Colmant, seems to follow suit on his own blog: “The main risk is the sudden decline of the dollar’s role in the global economy. The dollar is the currency of 60% of international trade, […] Monetary union initiatives between China, Russia and other countries might succeed, if the United States loses its military supremacy. If the dollar’s privilege erodes, the monetary system might collapse, leading to systemic monetary and social implosion and runaway global inflation. Monetary unions, including the euro, would be weakened and bank failures would follow.
OK as long as the States dominate the world
Such predictions are not infallible, but their premises are indisputable: money being the standard of value for economic exchanges, its credibility is guaranteed by the confidence in the power of the prince who “beats the currency”. And our finance is the heir to the Bretton Woods agreements (1944), which reorganized the world economically following the war. The British economist Keynes (1883-1946) pleaded for a non-national reserve unit, the “bancor”, as a currency for international trade. The Americans opposed the dollar and won. Here comes the “dilemma”, issued by the Belgian economist Robert Triffin (1911-1993). To supply the international economy with dollars and thus allow the circulation of the standard of exchange, the United States must structurally have an economic balance in deficit and therefore live on credit from the rest of the world. Such a situational rent is acceptable to other nations only as long as the States dominate the world. However, the recent political, but also monetary, rapprochements between China, Russia, Brazil and the other BRICS are calling such hegemony into question. A generalized weakening of the American banking system, following the explosion of its national debt, might therefore cause the collapse of the dollar standard, dragging the entire world economic system down with it.
A less predatory economy
The worst is fortunately not certain. The first collateral victim of a dollar crash would indeed be China, Uncle Sam’s great rival being also its main banker. Moreover, the United States has a heroic resilience to overcome crises and defend democracy around the world, as well as its own interests. Eventually, however, the dollar should be replaced by a non-national currency to regulate international trade, as Keynes suggested. And above all, the predatory economy of the planet will have to give way to a system more worthy of humans. “At the center of the global economy, there is the money god and not the person. This is the first terrorism” (Pope Francis, 08/1/2016).
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