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  • Writer's pictureJames Dean

A Global Economic Shift in Protectionism, Power and Currency

Since 1944, The Bretton Woods International Monetary Conference at the Mount Washington Hotel in New Hampshire, a group of 730 delegates from all 44 allied nations met to decide on making the U.S. dollar, the standard global currency underscoring all banking transactions and economic activity worldwide. But the world was a very different place then, and countries like China, India and United Arab Emirates were mere third world countries back in 1944 with a very low standard of living. Fast-forward today, as times have changed now with China, India and Saudi Arabia, all leading powers on the global economic stage. And Russia, once an ally of the United States, now seeks greater influence with leading partners in a formal alliance. This emerging powerful alliance is dubbed, the BRICS including China, Russia, Brazil, India, South Africa, Iran, Egypt, Ethiopia, and the United Arab Emirates.


Watch Video 1944, The Bretton Woods International Monetary Conference


Today, we live in increasingly competitive economic times, where even small countries have access to advanced artificial intelligence, quantum computing, automation, nuclear power, aerospace technology, vast clean energy and natural resources that enable geopolitical power and financial wealth. America now trillions of dollars in debt, politically and culturally fractured; attempts to hold on for dear life, as many countries call for a new global currency standard that provides better equity and less reliance on a single country world power.


This turning-point in history is further exasperated by the internal U.S. political leadership strife, corruption and scandals that have degraded the integrity and trust that the United States should be endowed as the global currency standard. America is declining in the eyes of many countries, therefore a reverse to globalism in the U.S. calls for bringing back core industries that are deemed strategic to maintaining power, but inevitably it may only delay short-term.


Protection is now the key shift among U.S. policy leadership in an effort to maintain global power. The four core points to America's urgent initiatives include protection for ...

  • workers

  • climate

  • supply chain

  • cultural and geopolitical interests


Watch Video Discussion on What's Occurring now on the Global Economic Stage


There are strong arguments to be made on both sides of whether a global trade currency not based on the USD would be more effective. Here's a breakdown of the potential pros and cons:


Potential Benefits:


  • Reduced Vulnerability to Sanctions: Countries facing US sanctions could conduct trade without relying on the US dollar, lessening economic damage.

  • More Balanced System: A new reserve currency could challenge the US dollar's dominance, creating a multipolar financial system with greater transparency and less dependence on one power.

  • Lower Transaction Costs:  Depending on the design, a new currency could streamline international transactions, potentially reducing costs for businesses.


Potential Challenges:


  • Building Trust and Adoption: Replacing a well-established reserve currency like the US dollar is incredibly difficult. Earning trust and widespread adoption from other countries would be a lengthy process.

  • Internal BRICS Agreement:  The BRICS nations have varying economic strengths and political priorities. Maintaining internal cohesion and agreement on currency management could be challenging.

  • US Countermeasures: The US would likely take steps to maintain the dollar's dominance, potentially through economic or political means.


Effectiveness:


Whether a non-USD global trade currency would be more effective depends on its ability to overcome the challenges. Here are some additional factors to consider:

  • Design: A well-designed currency, potentially a digital one, could offer advantages in efficiency and transparency.

  • Stability:  The new currency would need to be backed by a strong and stable economy or a basket of currencies to gain trust.

  • International Cooperation: Widespread participation from major economies would be crucial for success.


Current Global Situation:


While a BRICS currency presents an interesting possibility, it's unlikely to dethrone the US dollar in the immediate future. However, the discussion itself suggests a growing desire for a more multipolar financial system.


In fact, a growing number of countries are coming to see a non-USD global trade currency could be more effective, but success hinges on overcoming significant hurdles.


The current global economic system has inertia, but the long-term trend might be towards a more balanced financial order which could be based on a very efficient digital cryptocurrency that uses smart contract apps.


Predicting how long it would take to displace the US dollar as the global reserve currency is difficult, with estimates ranging from unlikely to happen soon to potentially decades, perhaps within the next 25 years given advanced digital technology. Here's why:


  • Deeply Entrenched System: The US dollar has benefited for decades from a well-established financial infrastructure and the stability of the US economy. Replacing that trust takes time.

  • Challenging to Build Trust: A new currency, especially one from a group of nations (BRICS), would need to establish itself as trustworthy and stable. This requires widespread international cooperation and acceptance.

  • US Response: The US is unlikely to accept a decline in its financial dominance easily. They might take economic or political measures to maintain the dollar's position.

Possible Scenarios:

  • Slow Decline: The US dollar might gradually lose dominance over a long period, with other currencies like the Euro or Yuan gaining traction.

  • BRICS Currency Limited Impact: Even if a BRICS currency is created, it might only be used within the BRICS bloc initially, with limited global impact.

  • Multipolar System: A more likely scenario might be a shift towards a multipolar financial system, with several major currencies playing a role, instead of a single dominant one.


Here are some additional factors that could influence the timeline:


  • BRICS Cohesion: If the BRICS nations remain unified and committed to the new currency, it could accelerate adoption.

  • Global Economic Shifts: Major economic changes, like a decline in US economic power, could create an opening for a new reserve currency.

  • Innovation: Technological advancements, like digital currencies, could play a role in how quickly a new system emerges.


Impact of USD replaced by a new global currency standard:


If the US dollar were replaced as the global reserve currency, how it affects the American quality of life is a complex issue with both potential benefits and drawbacks. Here's a breakdown of what might happen:

Potential Negative Impacts:


  • Weaker Dollar: A decline in the dollar's value could lead to higher import costs, causing inflation and making some goods and services less affordable for Americans.

  • Reduced International Influence: The US wields significant influence through its economic power. A weaker dollar could lead to a decrease in this influence on the global stage.

  • Higher Borrowing Costs: The US government and businesses might have to pay higher interest rates when borrowing internationally if the dollar loses its reserve currency status.


Potential Positive Impacts:


  • Focus on Domestic Issues: With less emphasis on maintaining the dollar's global standing, the US government could potentially devote more resources to addressing domestic issues like infrastructure and social programs.

  • Manufacturing Boost: A weaker dollar could make American exports more competitive in the global market, potentially boosting manufacturing and creating jobs.

  • Innovation: The need to adapt to a new financial landscape could spur innovation in the US financial sector.


So, the overall impact on American quality of life is difficult to predict and would depend on various factors, including how smoothly the transition occurs, the strength of the US economy relative to other countries, and the policies implemented by the US government.


Here are some additional points to consider:


  • The decline of the dollar wouldn't necessarily be catastrophic. The US economy remains large and diversified.

  • A multipolar financial system, where several currencies share reserve status, could emerge instead of a single dominant currency.

  • The US government could take steps to mitigate the negative effects, such as investing in infrastructure and promoting domestic manufacturing.


Conclusion:


While a complete displacement of the US dollar in the near future is unlikely, it still remains the conversation about alternatives highlighting a potential future with a more balanced global financial system. And the subject clearly defines America's need for smarter bipartisan leadership with a long-term vision focused on creating less friction and greater harmony. Ultimately, a truly equitable global currency might secure peace in the world.


About Author


James E Dean, author / eBusiness expert is located in Northeast Ohio with over 35 years of experience in Business Development. He is a graduate of Boston University. J Dean leads a team helping entrepreneurs, corporations and non-profits to succeed in a changing world. Questions contact 440-596-3380 or Email jdean@entangledvibrations.com

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