The fall of the US dollar and global power?
Keep calm and carry on with quality history (Adam Tooze)
Will the US dollar fall as global reserve currency?
Will the USA be ruined by a collapsing US dollar? No. Things are changing. But if you read quality history, you can keep calm and carry on. Let me tell you how.
First, a history lesson on economic rhetoric from Australia.
Back in the 1990s political journalism discovered the language of economic policy. Commentary on economic reform proliferated. The acerbic Australian Treasurer and Prime Minister Paul Keating fanned this fire and mocked his feeble imitators:
“I guarantee if you walk into any pet shop in Australia, the resident galah will be talking about microeconomic policy.”
Fast forward thirty years, independent media has discovered the language of geopolitics, doomed hegemons, and collapsing currencies. I guarantee if you tune into any YouTube channel on geopolitics, the resident galah will be talking about hegemony and the fall of the US dollar. They will distract you from calm, reliable, and nuanced voices.
Signs of decline of the US dollar and global power
There are fair reasons for the cheap talk, even if it is clouded by a spray of ads for gold and crypto coins. Since 1916 (the reason for this date will be disclosed later), the USA’s global power has sprung from its financial power. Since 1944, its unprecedented global leadership, which some call hegemony, is symbolised by the US dollar’s status as the prime ‘reserve currency’ of the world. The world hegemon sits on an iron throne furnished with US dollars.
But the US economy does not dominate a war-shattered world like it did in 1945. China outranks the USA on the best measure of economic output, GDP purchasing power parity. The share of the US-allied world economy is slipping. The grip of US sanctions is failing. The economies of BRICS outweigh the G7. Surely, the fall of the US dollar is nigh?
How to think about US dollar, global power, and hegemony
But the predictions of de-dollarization, the collapse of the US dollar empire, rival reserve currencies and economic orders keep failing too.
Both doomsters and boosters of the US dollar make mistaken predictions. They do not err because of the technical financial issues of currency swaps. They err by over-simplifying stories about the grand sweep of history.
What is the history lesson in all this cheap talk and false hope about the fall of the US dollar, the loss of its ‘exorbitant privilege’ (Charles de Gaulle), and the collapse of US global power?
How Adam Tooze helps you rethink America’s role in history
One quality economic historian, Adam Tooze, can be your best guide to all the talk about the US dollar, American power, and US hegemony.
You can keep calm and carry on by rethinking
How states use power as a “project”
How Britain’s empire was an “empire project” and US global leadership was a “hegemony project”
How history does unfold, not in a cycle, not in a sequence of world hegemons - (Rome, Britain, USA…. China?), but as a “one way ticket into the unknown.”
The TLDR is that one hegemon does not follow another. The ‘hegemony project’ of the USA is unique to its global power projection in the ‘American century’. The hourglass of that century has run out.
Should the US turn the hourglass over one more time to achieve ‘Greatness’ again? Or should the US calm down, carry on, and live humbly among equals?
I explain in the post for paid subscribers below. Read on if you are curious.