Thomas Fazi (UnHerd): Will America win from de-dollarisation?


UnHerd, while claiming to be apolitical, has a right-wing sugar daddy in former Liberal Democrat donor and businessman Sir Paul Marshall

UnHerd exists as part of a right-wing ecosystem of people, think-tanks, and publications that cosplay as outsiders while having access to the people at the heart of power and often having had access to the levers of power themselves at some point UnHerd cries that no one listens to it, while holding a hedge fund boss’ golden megaphone. And its free thinkers just happen to say exactly what that Brexit-obsessed big boss likes to hear.



Will America win from de-dollarisation?

The power of other local currencies is growing

BY Thomas Fazi

April 24, 2023

Thomas Fazi is an UnHerd columnist and translator. His latest book is The Covid Consensus, co-authored with Toby Green.



A key driver of this process has been the world’s gradual disengagement from the dollar. Its demise has been endlessly — and wrongly — predicted since the Sixties, so scepticism here is justified. This time, however, there is good reason to believe that it’s happening. De-dollarisation comes in many forms, but three are particularly easy to spot: the settling of international transactions in currencies other than the dollar, primarily the Chinese yuan; the reduction of the dollar in global foreign-exchange reserves; and the decline in foreign holdings of US Treasury bonds.


Therefore, there would need to be major changes in China’s financial markets and monetary-economic policies for the yuan to replace the dollar. These are valid claims, but they miss a fundamental point: the de-dollarisation process is primarily geopolitical in nature, not economic. It’s not just about finding an “efficient” system, but about challenging Western monetary hegemony. Moreover, de-dollarisation doesn’t necessarily mean the replacement of the dollar with the yuan, but the dispersion of reserve assets among several major currencies, and other assets, such as commodities such as gold.

And this would be no bad thing. The world’s reliance on the dollar makes economies excessively exposed to changes in US monetary policy, with periods of monetary loosening or, as now, tightening having dramatic knock-on effects on the rest of the world. Nor would this completely be to America’s disadvantage. As Michael Pettis and Matthew Klein argue, the current international and monetary financial system doesn’t pit the interests of nations against each other so much as it pits the interests of certain economic sectors against other economic sectors. In other words, it is not the US as a whole that benefits from the global dominance of the dollar, but rather certain constituencies within the US.

By attracting capital to the US and allowing it to help itself to foreign goods and resources such as oil, simply by printing its own currency — in what Valéry Giscard d’Estaing, de Gaulle’s Minister of Economy, called America’s “exorbitant privilege” — dollar dominance has undoubtedly benefited America’s imperial elites: Wall Street, large global corporations and, most importantly, the national security establishment. It’s what has allowed the US to sustain a regime of perpetual war, on top of exercising financial dominance over much of the world.

But this has come at a significant cost not only for the rest of the world but also for American workers, farmers, producers and small businesses. For America, supporting the world’s primary reserve currency has meant running permanent trade deficits, which has seriously eroded its industrial and manufacturing capacity and its ability to provide well-paying jobs to its workforce — what Pettis calls the “exorbitant burden” of the dollar. The end of this supremacy, then, would turn America into a somewhat “normal” country — a regional power among other regional powers. Both globally and within the US, this would benefit virtually everyone. Indeed, the only losers would be those who have had ample time to enrich themselves.


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