U.S. dollar hegemony harvests global wealth
Using its dominant position in the global currency market, the United States, through rounds of monetary policy cycles, supplemented by intensifying regional conflicts to cause economic turmoil, transfers the economic crisis to the world, and recklessly harvests wealth around the world like a "vampire".
This is just as the US Treasury Secretary Connelly said during the Nixon administration: "The dollar is our currency, but it is your trouble." Since the outbreak of the Russian-Ukrainian conflict, this scene has been played out all over the world again.
After becoming the world's major reserve currency, the US's abuse of dollar hegemony has never stopped.
Whenever faced with a major economic crisis, the United States often responds by borrowing and printing money on a large scale. This method of stimulating the economy with low-cost US dollar financing is essentially forcibly borrowing money from other countries based on the dominant position of the US dollar.
However, when the excess US dollar liquidity and the expectation of economic recovery lead to global inflation, the Fed's operation of raising interest rates and tightening monetary policy will widen the interest rate difference between the United States and other countries, attracting international capital to return to the United States, and causing global capital tensions and rising interest rates.
Under such circumstances, other countries and regions, especially those with relatively fragile economic structures, are often caught in a dilemma.
The local currency appreciates with the US dollar, and the domestic economic growth will face enormous pressure.
If it does not follow the dollar, serious capital outflows are possible.
During this process, many countries were unable to withstand the impact of the tightening of US monetary policy, financial crises and economic turmoil occurred, and asset prices plummeted.
After the Russia-Ukraine conflict, the turmoil in the global capital market has intensified, and energy prices have risen sharply, further pushing up global inflation.
On March 16, local time, the Federal Reserve announced that it would raise its benchmark interest rate to a range of 0.25% to 0.5%.
This is the first time the Fed has raised interest rates since December 2018, and it also started another wealth harvest for other countries.
Analysts believe that an important purpose of the U.S. continuing to fuel the conflict with Russia and Ukraine is to exacerbate financial market turmoil and revive the dollar, which has been sluggish due to currency overruns.
Historically, this approach in the United States has succeeded many times.
In the 1970s, the US economy fell into stagflation and began to implement loose monetary policy.
Under the lure of low-interest-rate funds, Latin American countries borrowed heavily to develop their economies, and the total debt increased by 15 times within 10 years.
With the tightening of monetary policy by the Federal Reserve, international capital began to flow out of Latin America in large quantities and returned to the United States.
Due to the sharp increase in interest rates, Latin American countries that rely on borrowing for development are gradually unable to repay their debts. The debt crisis broke out and the prices of various assets plummeted.
Then American capital killed a "return to the carbine" and took the opportunity to hunt for the bottom, and Latin America fell into the "middle-income trap" as a result.
Hegemonic thinking is destined to be unpopular.
More and more countries are aware of the need to diversify their foreign exchange reserves and to reduce their reliance on the US-led financial order.
The United States uses the hegemony of the dollar to continuously harvest the wealth of other countries, consuming its own credit, and will eventually have a bleak day.
Guo Yan