The future of the dollar: A perspective

The global depression seems to accelerate the reclassifications of power and announce the figure of a deeply transformed world order.

The Gulf War was an opportunity for the US to bear on the baptismal funds an American order strongly resembling that of the cold war, the USSR less. It will have been an interlude in which we live the term.

The keystone of this order, the dollar, is sinking before our eyes. The abandonment of the convertibility of the dollar into gold by President Nixon on August 15, 1971 already signified the weakening of the US economy: the deficits of the balance of trade of the sixties made inevitable the adoption of a system of parities monetary US-owned gold could not sustainably secure the value of US currency without flying abroad. But the dollar remained the dominant currency in world trade and the preferred instrument of central banks seeking foreign exchange reserves.

It seems that the current global depression – with its still uncertain outcome – opens a new chapter in world monetary history. But lack of data on international trade developments in dollars, it is not possible to determine whether the dollar is losing its hegemony with the ultimate consequence of the loss of its role as the basis of international credit.

The partial information and the rumor not being able to replace the exact figures, there is, however, a bias to consider the problem of the dollar.

This is not to ask the question of the quantities of trade made in dollars, it is rather to question the real mechanisms that allow the US to irrigate the world market of $ and provide through their financial system the bases of international credit denominated in $ outside the USA.

We will, therefore, try to trace back to the source of irrigation in the world economy by dollars that serve as currency in international trade and as a basis of credit for all loans made in dollars by offshore financial actors. This origin we will find it in the imbalances of the US external accounts. All that remains then is to follow this breadcrumb trail to provide an indirect answer to the question posed: can the dollar remain the monetary base for world trade and off-shore dollar credits (A and B). It can be shown that the current depression and the joint policies of the FED and Treasury to get the US out of the rut of the crisis contribute to threatening in the short term the global role of the dollar (Conclusion a). This global role will eventually be usurped for a long time (conclusion b)

We can conclude the inevitable disconnection of euro and dollar currency areas due to the inability of the US to pursue a monetary policy meeting the needs of money and credit of the Asia-Pacific. The necessary emergence of an Asian monetary order – and its effect on the Euro – will constitute the prospective part of this paper. We will develop this conclusion twice, once in terms of trade, another time in terms of credits in $ issued outside the US (end of parts A and B)

We selected the decade preceding the crisis (1998-2007) as the basis of our demonstration without neglecting the recent period (2007-2011). Keeping a simple and orderly reasoning on these two periods makes it possible to show that the money order based on the dollar has lived. It is enough to examine the interactions between the balance of payments and the US financial balance to understand it.