De-Dollarization and Hegemonic Crisis

“Things are happening that weren’t happening 100 years ago.” That was the world view Xi Jinping shared with Vladimir Putin on March 21 as Xi was leaving the historic meeting of the two great Eurasian powers. This is a transcendental time, during which the U.S. is approaching a hegemonic crisis that is materializing in the perceptible weakening of one of its foundations: the dollar. The dollar is a vital part of the U.S. diplomacy of force, with its focus on aggressive unilateralism. An example is the abusive spate of sanctions that have gone beyond the pale in affecting some 30 regions and nations, with devastating socioeconomic impact. The way in which the United States abuses its monetary superiority, as I have already warned, is part of the risky diplomacy of force.

“History tells us that the decline of hegemony often begins with its currency,” according to the Global Times in “GT Voice: De-dollarization Inevitable as Use of Other Currencies Accelerates,” as quoted by Prensa Alternativa.com, but it is not the only publication that warns about the conflict with, and unstable nature of, the dollar as a world currency.

The fact is that two axes of U.S. hegemony are deteriorating. One is the lack of monopoly on nuclear weapons, and the second is the accelerated decline in the dollar’s position as the world’s currency. With respect to the geopolitical dimension, the Eurasian Putin-Xi coalition implies an unprecedented transformation of the world’s geopolitical and geoeconomic dynamics.

For Ben Norton (geopoliticaleconomy.com) it is clear that Russia is moving away from Europe and integrating with Asia, and as a reader reminds him, the strategist Zbigniew Brzezinski once warned, “Potentially, the most dangerous scenario would be a grand coalition of China, Russia, and perhaps Iran, an ‘antihegemonic’ coalition united not by ideology but by complementary grievances.” That coalition exists today. I might add that Henry Kissinger also issued an equally emphatic warning.

Moreover, according to Thierry Meyssan (redvoltaire.net, 3/14/23), the reconciliation between Saudi Arabia and Iran, thanks to the Russian and Chinese administrations, “finally opens the door to an era of peace in the Middle East, closing 11 years of wars and of constant Western influence in the region.”

The monetary dimension is also at the core of this transformation. Putin was clear: “It is important that our national currencies are increasingly used in bilateral trade. … We support the use of the Chinese yuan in transactions between the Russian Federation and its partners in Asia, Africa and Latin America.” (Ben Norton, geopoliticaleconomy.com, 3/4/23).

Leading Peruvian media source Prensa Alternativa.com also informs us that the conflict between Washington and Beijing drives the struggle between the dollar and the yuan for supremacy as the world’s currency of exchange. According to Carlos Aquino, director of the Center for Asian Studies of the Universidad Mayor de San Marcos in Peru, the yuan is gaining ground at great speed in Latin America; its presence represents a significant challenge to the hegemony of the dollar in the region.

He recalled that “10 years ago, 80% of trade between China and Russia was in dollars, and today 90% is in the yuan, and this may happen with Latin America and the Caribbean. China’s most ambitious project, the New Silk Road, which has already incorporated 20 nations of the region, is reaching an economic weight similar to that of the entire African continent.”

In its most recent meeting, the important Association of Southeast Asian Nations contemplated abandoning the dollar and other powerful currencies to control its destiny. The BRICS group, consisting of Brazil, Russia, India, China and South Africa, is moving toward creating a new currency that can replace the U.S. dollar, starting with the use of their local currencies. Jose Vizner (Negocios.tv, 3/30/23) points out that China and Brazil are moving mutual trade to the yuan and away from the dollar and announcing that they will expand the supply of food, minerals and high value-added goods. “We are going to see the depreciation impact that the dollar may have as a hegemonic currency,” which is significant in terms of the global economy; last year, trade between China and Brazil reached a record $150 billion no longer traded in dollars, but in Chinese currency.

A final reflection: “Short-term pain for long-term gain” defines “the dangerous escalation of war by the United States and its Western allies against Russia and China. What is striking about the U.S. position is that it is trying to prevent a historical process that seems inevitable, which is the process of Eurasian integration … (which) threatens the primacy of the United States and the Atlantic elites.” (Introduction. Vijay Prashad in Bellamy Foster et. al. “The United States Is Waging a New Cold War: A Socialist Perspective,” Tricontinental, MRPress, NoColdWar, Contemporary Dilemmas Studies, September 2022).