Decline

Of the U.S. Dollar

DYI:  From WWII moving through decade to decade culminating the U.S. inside job 9/11 were the growth years of the American Empire.  That peak was maintained until the over the top COVID scam and the Russian Ukraine war.  The too big to invade countries – Russia, China and Brazil are moving away systematically from the U.S. dollar.  Saudi Arabia has stated they will use multiple currencies and no longer rely upon the dollar exclusively.  It will not be too long before news reports regarding some of the mid size countries such as Argentina or South Africa moving baby steps away from U.S. Empire.

 Archdruid, John Michael Greer talks about the late decay of empire, specifically the American Empire, but other empires as well.    

​..​​Roughly five per cent of the human race currently live in the United States of America. That very small fraction of humanity, until quite recently, got to enjoy about a third of the world’s energy resources and manufactured products and about a quarter of its raw materials... It happened because as the world’s dominant nation, the United States imposed unbalanced patterns of exchange on the rest of the world, and these funneled a disproportionate share of the planet’s wealth to this one nation.​.. America’s empire came into being in the wake of the collapse of the British Empire during the fratricidal European wars of the early twentieth century...

..The ascendancy of one empire simply guarantees that other aspirants for the same status will begin sharpening their knives.  They’ll get to use them, too, because empires invariably wreck themselves: over time, the economic and social consequences of empire destroy the conditions that make empire possible. That can happen quickly or slowly, depending on the mechanism that each empire uses to extract wealth from its subject nations...

​  ​The mechanism the United States used for this latter purpose was ingenious but even more short-term than most. In simple terms, the US imposed a series of arrangements on most other nations that guaranteed that the lion’s share of international trade would use US dollars as the medium of exchange, and saw to it that an ever-expanding share of world economic activity required international trade. (That’s what all that gabble about “globalization” meant in practice.) This allowed the US government to manufacture dollars out of thin air by way of gargantuan budget deficits, so that US interests could use those dollars to buy up vast amounts of the world’s wealth.  Since the excess dollars got scooped up by overseas central banks and business firms, which needed them for their own foreign trade, inflation stayed under control while the wealthy classes in the US profited mightily from the scheme...

..The problem with this scheme is the same difficulty faced by all Ponzi schemes, which is that sooner or later you run out of suckers to draw in...

​..​Fast forward to last year. When Russia launched its invasion of Ukraine in February 2022, the United States and its allies responded not with military force but with punitive economic sanctions, which were expected to cripple the Russian economy and force Russia to its knees. Apparently nobody in Washington DC considered the possibility that other nations with an interest in undercutting the US empire might have something to say about that. Of course that’s what happened. China, which has the largest economy on Earth in purchasing-power terms, extended a middle finger in the direction of Washington DC and upped its imports of Russian oil,  gas, grain, and other products. So did India, currently the third largest economy on Earth in the same terms; so did more than a hundred other countries.​..

​..At this point the sanctions are hurting the United States and Europe, not Russia, but the US leadership has wedged itself into a position from which it can’t back down. This may go a long way toward explaining why the Russian campaign in Ukraine has been so leisurely. The Russians have no reason to hurry. They know that time is not on the side of the United States...

..For many decades now, the threat of being cut out of international trade by US sanctions was the big stick Washington DC used to threaten unruly nations that weren’t small enough for a US invasion or fragile enough for a CIA-backed regime change operation. Over the last year, that big stick turned out to be made of balsa wood, and snapped off in Joe Biden’s hand.  As a result, all over the world, nations that thought they had no choice but to use dollars in their foreign trade are switching over to their own currencies, or to the currencies of rising powers.  The US dollar’s day as the global medium of exchange is thus ending.​..

..When the British pound lost a similar role in the early years of the Great Depression, no other currency was ready to take on its role either.  It wasn’t until 1970 or so that the US dollar finished settling into place as the currency of global trade. In the interval, international trade lurched along awkwardly using whatever currencies or commodity swaps the trading partners could settle on: that is to say, the same situation that’s taking shape around us in the free-for-all of global trade that will define the post-dollar era...

..The United States of America is bankrupt. Our governments from the federal level on down, our big corporations, and a very large number of our well-off citizens have run up gargantuan debts, which can only be serviced given direct or indirect access to the flows of unearned wealth the United States extracted from the rest of the planet. Those debts cannot be paid off, and many of them can’t even be serviced for much longer. The only options are defaulting on them or inflating them out of existence, and in either case, arrangements based on familiar levels of expenditure will no longer be possible. Since the arrangements in question include most of what counts as an ordinary lifestyle in today’s United States, the impact of their dissolution will be one for the record books.

​  ​In effect, the five per cent of us in this country are going to have to go back to living on about five per cent of the planet’s wealth, the way we did before 1945. If we still had the factories, the trained work force, the abundant natural resources, and the thrifty habits we had back then, that would have been a wrenching transition but not a debacle. The difficulty, of course, is that we don’t have those things any more.​..

​..The good news is that there’s a solution to all this. The bad news is that it’s going to take a couple of decades of serious turmoil to get there. The solution is that the US economy will retool itself to produce earned wealth in the form of real goods and nonfinancial services. That’ll happen inevitably as the flows of unearned wealth falter, foreign goods become unaffordable to most Americans, and it becomes profitable to produce things here in the United States again.  The difficulty, of course, is that most of a century of economic and political choices meant to support our former imperial project are going to have to be undone.

​..​The most obvious example?  The metastatic bloat of government, corporate, and nonprofit managerial jobs in American life...

​..​What will happen ... is that the middle and upper middle classes in the United States, and in many other countries, will face the same kind of slow demolition that swept over the working classes of those same countries in the late twentieth century...

..All the businesses that make money catering to these same classes will lose their incomes as well, a piece at a time. Communities will hollow out the way the factory towns of America’s Rust Belt and the English Midlands did half a century ago, but this time it will be the turn of upscale suburbs and fashionable urban neighborhoods to collapse as the income streams that supported them go away.

​  ​I want to stress that this is not going to be a fast process.  The US dollar is losing its place as the universal medium of foreign trade, but it will still be used by some countries for years to come. 

The unraveling of the arrangements that direct unearned wealth to the United States will go a little faster, but that will still take time.

  The collapse of the cubicle class and the gutting of the suburbs will unfold over decades.  That’s the way changes of this kind play out.​..We are dancing, we Americans, on the brink of a long slippery slope into an unwelcome new reality.