Toppling That Almighty Dollar
Christine Lagarde as Saddam Hussein
Back when Saddam Hussein was still a thing - well, an unhanged thing - the wilder shores of conspirazoid fermentation had this idea that the whole Iraq war - even both of them - was about the Almighty Dollar. You see, Saddy - as he was known to friends - was going to sell Iraq’s oil in euros. And Iran might follow suit. This would then dethrone the $ as the pricing point for oil and so bankrupt America. Because, obviously, being the global reserve currency gave the US such vast power and if that were broken - by moving to trading oil not in dollars - then that would be brill. Obviously.
Sadly, all rather Underpants Gnomes. Because there’s no link at all between the dollar as the international reserve currency and the power and wealth of the US. They’re shit rich because they’re shit rich not because we use their pieces of paper. They’re powerful for the same reason they were in WWII. If they decide to turn that economy on in military mode then the rest of us are simply going to get swamped.
As Paul Krugman has pointed out there is a benefit, yes, but it’s pretty small. The Federal Reserve does make a profit from the $100 bills it exports. An awful lot of those never do make it back into the American economy. They get passed around between drug dealers and corrupt politicians almost never even gaining an airing outside their briefcases. Money that never gets spent is indeed a freebie to the US economy. As Krugman says that’s about $20 billion a year. Nice to have, certainly, but pretty trivial in an economy roaring toward $40 trillion a year.
Which brings us to:
Despite the tough talk about slapping 50pc tariffs on the EU, Donald Trump has given Brussels a golden opportunity.
After years of disappointment, false hope and crises, the euro could at last wrest international dominance away from the dollar to become a – and possibly the – global reserve currency of choice.
Or so Christine Lagarde hopes. The president of the European Central Bank (ECB) set out her master plan last week to at long last fulfil the dream of leading the financial world.
“Moments of change can also be moments of opportunity. The ongoing changes create the opening for a ‘global euro moment’,” she said in a speech in Berlin, in which she retold the story of the pound losing its dominance a century ago amid the rise of the US dollar.
“This is a prime opportunity for Europe to take greater control of its own destiny.”
When such ideas stay on the wilder shores of that conspirazoid fermantation then we can all relax. When it’s the central banker for a continent who belives this shit we’ve all got rather more of a problem.
Sigh. Glad we left yet?