The sun is setting on dollar supremacy, and with it, American power

The Telegraph -

A serious alternative to the dollar is still a long way off, but the latest   shenanigans on Capitol Hill have given the search for them renewed momentum.

All great empires – from the Greek, to the Roman, the Spanish and the British   - have at their heart a dominant means of exchange which is very much part   of their political and social hegemony. Once upon a time, it was Roman   coinage which was the world’s pre-eminent currency. In more recent times it   was the British pound. Today, it’s the US dollar to which international   investors flock as a safe haven for their money. Highly liquid and   apparently reliable – until recently at least – nothing else comes even   remotely close to the greenback’s dominant position in the international   monetary system.

That this position – what Giscard d’Estaing referred to as America’s “exorbitant   privilege” – could so casually be put at risk by politicians on Capitol   Hill is an extraordinary spectacle that may be indicative of a great power   already seriously on the wane.

With the pound, the fall from grace was swift. Britain emerged from the   devastation of the First World War an irreparably damaged economic and   military power, with crushing debts and a deeply impaired manufacturing   sector.

The dollar was able quickly to usurp the pound’s position. Final defeat for   sterling came with Britain’s decision to leave the gold standard in 1931 –   an economically sensible decision but a psychological turning point for   sterling from which it never recovered.

Lack of any credible alternative means it won’t happen so quickly with the   dollar. For all the progress of the last 30 years, China for now remains a   much smaller economy than the US and in any case is nowhere near ready   financially to assume such a role. As for the euro, the dollar needn’t   trouble itself much about this one-time pretender to the throne.


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