By Jun Sheng
Half a century ago, former French president Charles de Gaulle had pointed out that the US enjoyed exorbitant privilege and deficit without tears created by its dollar, and used the worthless paper note to plunder the resources and factories of other nations. His insight into the US dollar hegemony still rings true today.
No other currency has infiltrated into the blood veins of the world economy so deeply as the US dollar after WWII. The currency is so dominant in the global settlement of trade and in the foreign exchange reserves of foreign central banks that the US can use a 100-dollar greenback note, minted at the cost of 14 cents only, to get other countries to provide it with goods and services equivalent to its face value. That’s the "seigniorage" charged by the US on the whole world. Sitting on the throne made of the hegemonistic US dollar, all the US needs to do is print money and issue bonds, and it can enjoy – endlessly – what Niall Ferguson, an American historian, called "the biggest free lunch in modern economic history". US dollar, the key reserve currency in the world, is increasingly becoming a tumor eating at its holders, and its parasitic nature has been revealed to the full by America's arbitrary manipulation.
With the hegemonistic US dollar as a weapon, the overbearing and self-willed US likes playing fast and loose between currency inundation and tightening to consistently create "controllable turbulence" in the financial and economic sectors. From the mid-income trap of Latin American countries to the financial crisis in Asia and the international financial crisis in 2008, the shadow of the US dollar is at play behind each and every crisis, yet every time the culprit itself got away unscathed, leaving other countries bearing double blows with their wealth accumulated over long years all turning into ashes. No wonder John Connally, Secretary of the Treasury of the Richard Nixon administration, once said with much pride, "It's our currency, but it's your problem."
After the COVID-19 pandemic broke out, America took the abuse of US dollar hegemony to a new level. It printed nearly half of the currencies printed in the past 200-plus years in just one year and a half, allowing the pressure of inflation, turmoil and economic bubble to spill over, which was followed by four increases in the interest rate this year. This kind of "roller-coaster" approach lent another blow to the already teetering international financial market and seriously obstructed the global economic recovery. Ironically, because of the dominance of the US dollar in the global financial system, it is other countries, especially emerging economies, that have to pay for Uncle Sam's irresponsible policies.
What's more, the US has turned its currency into a geopolitical weapon by constantly wielding the stick of sanctions and creating financial terrorism. After the Taliban took power in Afghanistan, the US government froze billions of dollars of the Afghan central bank's foreign exchange reserves, plunging its economy to the verge of collapse. After the Russia-Ukraine conflict broke out, it launched a series of maximum sanctions against Russia including financial blockade and export control, trying to throttle Moscow in finance, trade, science and technology, and many other aspects. Regarding the Nord Stream 2 natural gas pipeline connecting Germany and Russia, Washington didn't think twice before threatening its European ally…
All these willful and reckless behaviors have put the world on high alert against Washington's abuse of the US dollar hegemony, and more countries call for delinking from the currency. Knowing this too well, Washington has never hesitated to attack any rivals of the dollar in order to keep enjoying the currency hegemony. In 1999, less than three months after the official issuance of the Euro, the Kosovo War broke out, giving the fledgling European currency a taste of what it was up to. In 2009, during the European debt crisis, the US poured fuel into flames and hurt the Euro so much that it hasn't come back to the pre-2008 level before the international financial crisis.
Despite all its scheming and trick-playing, the hegemony of US dollar is coming to an end. Data from the International Monetary Fund (IMF) show that the share of US dollar in the international reserves of central banks worldwide dropped to 58.81% in the fourth quarter of 2021, a new low in 26 years. Even its iron-clad ally Israel is diversifying foreign exchange reserves and reducing the share of US dollar. George Soros, a financial tycoon, said US dollar will no longer be the main reserve currency and medium of transaction in a few years.
He whose capacities and virtues don't match his position will not end well. As the COVID-19 pandemic is still lingering and the world economy is having a hard time recovering, America's greedy pursuit of self-interests and wanton manipulation of US dollar hegemony have become the source of global instability and uncertainty. It is the true saboteur of international rules and world order. But the "balance of hegemony" is running thin and excessive sanctions are sure to backfire. The US should wake up from its doomsday craziness and live up to its responsibilities as a major country.
