by Bridgette Grillo, Krystal Alexander, Nicole Fletcher
Chris Hedges, “The
American Empire Is Bankrupt,” Truthdig, June 15, 2009,
“De-Dollarization: Dismantling America’s Financial-Military
Empire: The Yekaterinburg Turning Point,” Global Research,
June 13, 2009,
Fred Weir, “Iran and
Russia Nip at US Global Dominance” Christian Science
Monitor, June 16, 2009,
“Medvedev Shows Off Sample Coin of New ‘World Currency’ at
G-8,” Bloomberg, July 10, 2009, http://www.bloomberg.com/apps/news?pid=20601087
Edmund Conway, “UN
Wants New Global Currency to Replace Dollar,” Telegraph
(UK), September 7, 2009,
Jose Arturo Cardenas,
“Latin American Leftists Tackle Dollar with New Currency,”
Agence France-Presse, October 16, 2009, http://www.google.com/hostednews/afp/article/ALeqM5jisHEg79Cz8uRtYfZR6WK4JmWsIg.
Nicole Fletcher (Sonoma
(Indian River State College)
(Sonoma State University)
Ronald Lopez (Sonoma
Elliot D. Cohen (Indian
River State College)
Mickey Huff (Diablo
Nations have reached their limit in subsidizing the United States’
During meetings in June 2009 in Yekaterinburg,
Russia, world leaders such as China’s President Hu Jintao, Russia’s
President Dmitry Medvedev, and other top officials of the six-nation
Shanghai Cooperation Organization (SCO)
took the first formal step to replace the dollar as the world’s reserve
The United States was denied admission to the
If the world leaders succeed, the dollar will dramatically plummet
in value; the cost of imports, including oil, will skyrocket; and interest
rates will climb.
Foreigners see the International Monetary Fund (IMF),
World Bank, and the World Trade
Organization (WTO) as Washington surrogates in a financial system backed
by US military bases and aircraft carriers encircling the globe.
But this military domination is a vestige of an
American empire no longer able to rule by economic strength. US military
power is muscle-bound, based more on atomic weaponry and long-distance air
strikes than on ground operations, which have become too politically
unpopular to mount on any large scale.
As Chris Hedges wrote in June 2009,
“The architects of this new global exchange
realize that if they break the dollar they also break America’s military
domination. US military spending cannot be sustained without this cycle
of heavy borrowing.
The official US defense budget for fiscal
year 2008 was $623 billion. The next closest national military budget
was China’s, at $65 billion, according to the Central Intelligence
To fund the permanent war economy, the US
has been flooding the world with dollars.
The foreign recipients turn the dollars over to
their central banks for local currency. The central banks then have a
problem. If a central bank does not spend the money in the United States,
then the exchange rate against the dollar increases, penalizing exporters.
This has allowed the US to print money without restraint, to buy imports and
foreign companies, to fund military expansion, and to ensure that foreign
nations like China continue to buy American treasury bonds.
In July 2009, President Medvedev illustrated his call for a supranational
currency to replace the dollar by pulling from his pocket a sample coin of a
“united future world currency.”
The coin, which bears the words “Unity in
Diversity,” was minted in Belgium and presented to the heads of G8
In September 2009, the United Nations Conference on Trade and Development
proposed creating a new artificial currency that would replace the dollar as
The United Nations wants to redesign the
Bretton Woods system of international
exchange. Formation of this currency would be the largest monetary overhaul
since World War II.
China is involved in deals with Brazil and
Malaysia to denominate their trade in China’s Yuan, while Russia promises to
begin trading in the Ruble and local currencies.
Additionally, nine Latin American countries have agreed on the creation of a
regional currency, the Sucre, aimed at scaling back the use of the US
dollar. The countries, members of the Bolivarian Alliance for the
a leftist bloc conceived by Venezuela’s President Hugo Chávez, met in
Bolivia where they vowed to press ahead with a new currency for
The Sucre would be rolled out beginning in 2010
in a nonpaper form. ALBA’s member states are Venezuela, Bolivia, Cuba,
Ecuador, Nicaragua, Dominica, Saint Vincent and the Grenadines, and Antigua
The cycle supporting a permanent US war economy appears to be almost over.
Once the dollar cannot flood central banks and no one buys US treasury
bonds, the American
global military empire collapses.
The impact on daily living for the US population could be severe.
Our authors predict that in addition to increased costs, states and cities
will see their pension funds drained.
The government will be forced to sell off
infrastructure, including roads and transport, to private corporations.
People will be increasingly charged for privatized utilities that were once
regulated and subsidized. Commercial and private real estate will be worth
less than half its current value. The negative equity that already plagues
25 percent of American homes will expand to include nearly all property
It will be difficult to borrow and impossible to
sell real estate unless we accept massive losses. There will be block after
block of empty stores and boarded-up houses. Foreclosures will be epidemic.
There will be long lines at soup kitchens and
many, many homeless.
Update by Michael Hudson
Foreign countries are presently seeking to create an international monetary
system in which central bank savings do not fund the United States’ military
At present, foreign “dollar holdings” take the
form of US treasury bonds, used to finance the (largely military) US
domestic budget deficit, a deficit that is largely due to military spending.
Russia, China, India, and Brazil (BRIC)
have taken the lead in seeking an alternative system.
But almost no information about such a system
was available in the US or even the European press, except for a shorter
version of my “De-Dollarization” article that I published as an op-ed in the
Financial Times of London.
Discussions about creating an alternative monetary system have not been
public. I was invited to China to discuss my views with officials there and
to lecture at three universities, and was subsequently asked to write up my
proposals for Premier Wen Jiabao, pending another visit just prior to this
year’s meetings between China, Russia, India, and Brazil, with Iran
attending with visitor status.
All of this signals that other countries are
seeking an alternative.
Now that the Euro has collapsed,
there’s currently little alternative to the dollar as a reserve currency.
This implies that there is no national currency that is a stable store of
value for international savings.
Meanwhile, US money managers are leading the flight from the dollar to
Brazil, China, and other “emerging market” countries. As matters stand,
these countries are selling their resources and companies for free - as the
dollars being spent to buy them end up in their central banks, to be
recycled into US treasury bonds, or to be used to purchase Euro debt that is
plunging in international value.
The result of this conundrum is the pressure to end the postwar era of “free
capital movements” and to introduce capital controls.
There has been almost no press discussion of my story or indeed of the issue
itself. US and European media have successfully ignored the proposal of an
alternative to the existing state of affairs.
Update by Fred Weir
This story illustrates one aspect of post–Soviet Russia’s search for a place
in the US-led global order - a position that would reflect that country’s
own distinct geopolitical interests and how it differs from the West in
terms of history, culture, and level of economic development.
Russia inherited from the former Soviet Union
close relations with many countries that the US regards as “rogue states,”
including Iran, Cuba, and Venezuela.
There continues to be a lot of official, public
sympathy for those countries and their opposition to the US global system,
even though Moscow no longer has any grand sense of anti-Western ideology or
even any practical goal of mobilizing toward an “alliance” that would serve
George W. Bush
administration, Moscow felt itself under pressure from what it
viewed as Western encroachments into the post-Soviet space, what Russians
term the “near abroad.”
This took the form of “colored revolutions,” or
what the Western media referred to as “pro-democracy uprisings” in Georgia,
Ukraine, and Kyrgyzstan, which removed corrupt but Moscow-friendly regimes
and brought to power much more outspoken and active pro-Western ones. The
Kremlin, rightly or wrongly, interpreted these upheavals as US-sponsored and
orchestrated attempts to reengineer the political loyalties of neighboring
states with which Russia has deep historical ties.
Two of those new leaders, Georgia’s Mikheil
Saakashvili and Ukraine’s Viktor Yushchenko, sought to put their
countries on a fast track to membership in the North Atlantic Treaty
a prospect that Russia viewed with alarm bordering on panic.
Another Bush-era initiative that
engendered deep hostility in Moscow was a plan to station strategic
antimissile interceptors in neighboring Poland, with associated radars in
the Czech Republic. Russian military experts argued these deployments were
the beginning of a strategic process that might eventually undermine
Russia’s own aging, Soviet-era nuclear deterrent, which is the main priority
of Russia’s national defense.
In response to these perceived threats, Russia seemed to sometimes go out of
its way to cultivate relationships with other countries that were at odds
with the US, which is the subject of this story. The Russians also held war
games with the Venezuelan navy in the Caribbean, resumed cold war-era
nuclear bomber patrols along the North American coast, and talked about
revitalizing former Soviet air bases in Cuba.
In the past year, with substantially changed foreign policy priorities
brought in by President
Barack Obama, Moscow’s attitude has
relaxed somewhat. Obama shelved the controversial plan to station
antimissile weapons in Poland, and implicitly removed from the agenda any
question of inducting Ukraine and Georgia into NATO.
The so-called Obama “reset” of relations between
Moscow and Washington seems to be improving prospects for cooperation, even
on such thorny issues as
Iran, though it may be too early to draw
any firm conclusions.
See below for further references to articles I have written on this topic.
Stories on Russia’s overtures to Cuba and
Stories on Russia’s relations with Iran
Stories on US–Russian relations