Media Distracted with Trump Indictment While Dollar Dominance Being Decimated
If the Chinese yuan were to become the global reserve currency, it would, in essence, give the CCP the ability to cripple entire nations.
A version of this article appeared first in The Federalist.
In July 1944, forty-four 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 United States Greenback would be the world’s reserve currency.
It has been almost eighty 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, world GDP is expected to be $112.6 trillion. That is an increase of 1,441%. Billions of people have been lifted out of poverty because of this.
China is working overtime to disrupt the dollar-denominated world economy. The significance of the dollar losing its premier position cannot be overstated. The Biden Administration should not overlook.
Renowned economist, Dr. Thomas Sowell, once famously wrote, “[f]rom the standpoint of a society as a whole, money is just an artificial device to give us incentives to produce real things—goods and services.” These goods and services, pointed out by Adam Smith, are the real “wealth of nations.” From the standpoint of our globalized economy, whose money is used to get things done is of paramount importance.
Most Americans may be unaware of crucial transactions occurring around the globe recently. And who could blame them? All the legacy media’s main headlines have been over the now-public indictment of former President Donald Trump, over factually-weak allegations, involving a supposed hush-money payment 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 transact with some of our major allies and trading partners in the Yuan. Importantly, China is doing this with nations whom need a better steward.
Bloomberg News, in February 2023, reported the Inevitable Rise of the Petroyuan (Yuan’s used to settle Middle East oil transactions), was a “myth.” One month later, The Wall Street Journal, reported 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 powers over the nation’s money supply.
China, in effect, 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 to transact with other nations, it would require exchanging for the Yuan.
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.
For 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 who has no issue retaliating against other sovereign nations who disagree with them. Just ask Australia.
If the Chinese Yuan were to become the global reserve currency, it would, in essence, give the Chinese Communist Party the ability to cripple entire nations by arbitrarily restricting credit, enacting sanctions, blocking entire nations from global commerce vis a vis foreign exchange prohibition, or any of the other vast economic warfare tools being 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, inter alia, accept genocide, persecution of minorities, the desecration of civil rights. We can bet that nations would likely have to become complicit. That is not out of the realm of possibility when dealing with actors such as communists.
With a country as hostile as China, entire sovereign nations would be subject to the whims of the communists who run their country. They would not be sovereign whatsoever. Such a future does not have any shining cities upon a hill.
Mackenzie Alan Bettle is an economist and attorney located in Phoenix, Arizona.
The united states has been doing the exact things you claim china will do but under the guise of freedom .countries need to become more independent not dependant on a central anything.