PUNDITS are busy sifting US President-elect Donald Trump’s nominations for key roles in his administration for signs as to how he will approach world politics, dividing his picks into “America first” hawks and neocon uber-hawks.
They might be better looking at the factors driving US foreign policy, which turn first of all into the weakening power of US imperialism and its efforts to maintain the global hegemony it secured at the end of the cold war.
One Achilles heel is the position of the dollar as effectively the world’s reserve currency. It sits alongside the strength of the US’s hypertrophied military as one of the two pillars of US global dominance.
The fact that the world has so far continued to buy dollars come what may has underpinned US power, funding its enormous deficits, themselves largely used to finance the Pentagon, as well as allowing it — through threat of exclusion from the dollar economy — to increasingly export its foreign policy and extend unilateral sanctions to third parties.
Yet this position is being eroded. Sooner or later, US indebtedness will hit its limit. It is currently a staggering $35 trillion (£27.6trn) and escalating each year. Trump’s commitment to tax cuts and more military spending will only enlarge the gap, whatever spending reductions his new adviser Elon Musk is able to find elsewhere.
So, the day may not be far off when money markets no longer see the dollar as the ultrasafe investment they presently do, in which case interest rates will rise, in turn exacerbating the problem. At present, interest payments cost each US citizen nearly $2,500 (£1,976) a year.
The Brics countries constitute another threat. Their summits regularly call for reduced reliance on the dollar — and this is not just hot air. Increasingly, countries outside Washington’s immediate alliance networks are seeking to transact their business in other currencies.
While no other currency looks in a position to take over as a global reserve, since China does not allow full convertibility of the renminbi, many states, including major exporters, are looking to settle balances in their own tender.
Trump, not as much of an ignoramus as he contrives to present, is aware of the danger. In one of his less-noticed threats during the election campaign, he wielded the big stick at any state thinking of dumping the dollar.
“We will keep the US dollar as the world’s reserve currency,” he said. “It is currently under major siege. Many countries are leaving the dollar.
“They’re not going to leave the dollar with me. I’ll say, ‘You leave the dollar, you’re not doing business with the US, because we’re going to put 100 per cent tariff on your goods.’”
On another occasion, the President-elect said flatly that he “would not allow countries to go off the dollar.”
Trump accurately pointed out that if the dollar should lose reserve-currency status, “that will be like losing a revolutionary war. That will be a hit to our country, just like losing a war. We can’t let that happen.”
Since Trump is already pledging trade wars on a broad front, his threat should be taken seriously. But it is beyond the powers of the US President to decree universal use of the dollar, the more so when his own policies will undermine its value and risk its inflationary debasement.
Trump’s bluster underscores the vulnerability of US imperialism and the sense of a world gradually escaping Washington’s grip.
De-dollarisation advances the cause of world peace by limiting Washington’s capacity to fund its military through huge deficits and by reducing its foreign policy clout. It is the world’s hedge against US aggression.
