In July 1944, 44 delegates from Allied countries came together during World War II in Bretton Wood, New Hampshire. The goal? Devise an international currency system to manage foreign exchange that would disadvantage no country and effectively facilitate post-war rebuilding and commerce. The outcome: The U.S. greenback would be the world’s reserve currency.
It has been almost 80 years since, and all nations have been better off with a United States dollar-dominated world. World gross domestic product (GDP) in 1940 was $7.81 trillion. For 2023, the world GDP is expected to be $112.6 trillion. That is an increase of 1,441 percent. Billions of people have been lifted out of poverty because of this.
China is working overtime to disrupt the dollar-dominated world economy. The significance of the dollar losing its premier position cannot be overstated. The Biden administration should not overlook this.
Most Americans may be unaware of crucial transactions occurring around the globe recently. And who could blame them? All the corporate media’s main headlines have been over the now-public indictment of former President Donald Trump, over factually weak allegations involving hush-money payments to a porn star.
The indictment of a former president is a crossing-of-the-Rubicon moment in American history. But displacing the dollar as the world’s reserve currency, as China and Russia have both made known is their objective, has analogous ramifications for the world. But while the world watches Trump’s indictment, they are missing China’s transactions with some of our major allies and trading partners in the yuan. Notably, China is doing this with nations that need better stewards.
Bloomberg News reported in February 2023 that the Inevitable Rise of the Petroyuan (yuan used to settle Middle East oil transactions) was a “myth.” One month later, Saudi Arabia and OPEC are now considering just that.
In our republic, the founders “separated the purse from the sword.” With the passing of the Federal Reserve Act of 1913, Congress further separated the purse from our elected representatives by giving the Federal Reserve power over the nation’s money supply.
China has no such separation of powers. President Xi Jinping wields both the sword and purse. What that means if the yuan were to become the global reserve currency is giving the Chinese Communist Party effective control over the money supply for the entire world. The United States would still have the dollar, but it would require exchanging for the yuan to transact with other nations.
Inflation and deflation can both have devastating effects on the economy. Deflation is what caused the Great Depression. Inflation, as we all feel the pain currently, caused an entire decade to be lost in the 1970s.
Allowing China to become the facilitator of the currency used in global commerce, such as the dollar is now, would be to give unprecedented powers to a communist dictatorship. The ebbs and flows of the global economic apparatus would be subject to a hostile foreign power that has no issue retaliating against other sovereign nations that disagree with them.
If the Chinese yuan were to become the global reserve currency, it would, in essence, give the CCP the ability to cripple entire nations. With a country as hostile as China, entire sovereign nations would be subject to the whims of the communists who run their countries. The CCP could arbitrarily restrict credit, enact sanctions, block entire nations from global commerce vis a vis foreign exchange prohibition, and use any of the other vast economic warfare tools the global reserve currency brings. Of course, unless nations decide to toe the Communist Party line.
The world would be like when we were younger and our financial life was dependent upon allowances given to us by our parents. Except in this case, instead of doing chores, nations would have to accept genocide, persecution of minorities, and the desecration of civil rights. We can bet governments would likely have to become complicit. That is not out of the realm of possibility when dealing with actors such as communists.