Difference between revisions of "US/Dollar/hegemony"
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*Increased demand for US financial assets (driving up prices of stocks and bonds and lowering interest rates, therefore increasing (apparent) household wealth).<ref>[http://yaleglobal.yale.edu/content/why-dollar-hegemony-unhealthy Why Dollar Hegemony Is Unhealthy]</ref> | *Increased demand for US financial assets (driving up prices of stocks and bonds and lowering interest rates, therefore increasing (apparent) household wealth).<ref>[http://yaleglobal.yale.edu/content/why-dollar-hegemony-unhealthy Why Dollar Hegemony Is Unhealthy]</ref> | ||
*Foreign-held US dollars can be used as "''hostage capital''". In the event of political conflict between the United States and another nation, the former with all its military power can confiscate or freeze these assets or otherwise limit their use. It can impose special regulations or at least use regulations for a time, in order to attain certain political, economic, or other goals.<ref>[http://faculty.georgetown.edu/imo3/petrod/define.htm Definition of Petrodollars]</ref> | *Foreign-held US dollars can be used as "''hostage capital''". In the event of political conflict between the United States and another nation, the former with all its military power can confiscate or freeze these assets or otherwise limit their use. It can impose special regulations or at least use regulations for a time, in order to attain certain political, economic, or other goals.<ref>[http://faculty.georgetown.edu/imo3/petrod/define.htm Definition of Petrodollars]</ref> | ||
| + | *Because of the international reserve-currency status of the $US, any conflict or destabilisation in another country will tend to increase the hegemony of the $US and so increase the advantages listed above. | ||
=== examples === | === examples === | ||
1979: After the [[Iranian Revolution]], the United States ended its economic and diplomatic ties with Iran, banned Iranian oil imports and froze approximately 11 billion US dollars of its assets.<ref>Suzanne Maloney (2010): [http://iranprimer.usip.org/resource/revolutionary-economy "The Revolutionary Economy"]. United States Institute of Peace. Retrieved 17 November 2010.</ref> | 1979: After the [[Iranian Revolution]], the United States ended its economic and diplomatic ties with Iran, banned Iranian oil imports and froze approximately 11 billion US dollars of its assets.<ref>Suzanne Maloney (2010): [http://iranprimer.usip.org/resource/revolutionary-economy "The Revolutionary Economy"]. United States Institute of Peace. Retrieved 17 November 2010.</ref> | ||
Revision as of 18:57, 8 September 2014
The term describes a geopolitical phenomenon of the 20th century in which the U.S. dollar, a fiat currency, became the primary reserve currency internationally. Three developments allowed dollar hegemony to emerge over a span of two decades.
Contents
Stages of development
Abandoning the gold-exchange standard
The Bretton Woods system established a fixed exchange rate regime based on a gold-backed dollar in 1945. The USA did not view cross-border flow of funds necessary or desirable for promoting trade or economic development. Starting in the 1959-1969 administration of President Charles de Gaulle and continuing until 1970, France reduced its dollar reserves, exchanging them for gold at the official exchange rate, reducing US economic influence. This, massive drain in US gold holdings. along with the fiscal strain of federal expenditures for the Vietnam War and persistent balance of payments deficits, led US President Richard Nixon to abandon the Bretton Woods regime on August 15, 1971 and suspend the dollar's peg to gold. The $USD gradually devalued with respect to Gold and, in October 1976, the government officially changed the definition of the dollar; references to gold were removed from statutes. From this point, the international monetary system was made of pure fiat money.
Petrodollar
Denomination of oil in dollars after the 1973 Middle East oil crisis increased demand for US dollars; see petrodollars.
Deregulation
The emergence of deregulated global financial markets after the Cold War made cross-border flow of funds routine.
Advantages for the USA
- Lower import costs/domestic inflation than what would exist by normal trading alone.
- Ability to run large trade deficits (by exchanging valuable resources for paper IOUs)[1] A variation on this is that the USA cannot face a balance of payments crisis, because it can purchase imports in its own currency (that it can simply print). [2]
- Increased demand for US financial assets (driving up prices of stocks and bonds and lowering interest rates, therefore increasing (apparent) household wealth).[3]
- Foreign-held US dollars can be used as "hostage capital". In the event of political conflict between the United States and another nation, the former with all its military power can confiscate or freeze these assets or otherwise limit their use. It can impose special regulations or at least use regulations for a time, in order to attain certain political, economic, or other goals.[4]
- Because of the international reserve-currency status of the $US, any conflict or destabilisation in another country will tend to increase the hegemony of the $US and so increase the advantages listed above.
examples
1979: After the Iranian Revolution, the United States ended its economic and diplomatic ties with Iran, banned Iranian oil imports and froze approximately 11 billion US dollars of its assets.[5]
2013: The chairman of the Majlis Planning and Budget Committee said $100 billion of Iran’s money was frozen in foreign banks because of the sanctions imposed on the country.[6] As of 2013, only $30 billion to $50 billion of its foreign exchange reserves (i.e. roughly 50% of total) was accessible because of sanctions.[7]
2014: The unilateral $9 billion American fine against BNP Paribas for violations of U.S. sanctions that were not laws of France or the other countries involved in the transactions.[8]
References
Notes
- ↑ Why Dollar Hegemony Is Unhealthy
- ↑ Exorbitant privilege
- ↑ Why Dollar Hegemony Is Unhealthy
- ↑ Definition of Petrodollars
- ↑ Suzanne Maloney (2010): "The Revolutionary Economy". United States Institute of Peace. Retrieved 17 November 2010.
- ↑ http://www.tehrantimes.com/politics/111742-100-billion-of-irans-money-frozen-in-foreign-banks-mp
- ↑
{{URL|example.com|optional display text}} - ↑ In BNP Paribas Case, an Example of How Mighty the Dollar Is
See also
video: The_absurdity_of_Dollar_hegemony
Page credit
This page imported content from Wikipedia on 9 September 2014.Wikipedia is not affiliated with Wikispooks. Original page source here
