IPS: What about longer-term strategic issues that may not be getting enough attention?
Chas Freeeman: One is very apposite today, and that is the future of the U.S. dollar as a reserve currency. At Bretton Woods, the dollar became the global reserve currency, backed by gold. A quarter century later, Nixon eliminated the gold backing for our currency.
Dollar hegemony has been central to our ability to basically go off the tracks fiscally and financially here. It has enabled us to avoid addressing all sorts of problems with which we’re now afflicted, and it has enabled us to avoid having financial discipline being imposed on us of the sort we have insisted be imposed on every other country under IMF (International Monetary Fund) guidelines.
The role of the dollar as a universal currency for reserve and trade settlement purposes is absolutely central to our international power and reach. Furthermore, we have used the fact that the dollar is an extension of our sovereignty to impose unilateral sanctions all over the place and to manipulate the global banking sector to enforce our policies, even when those policies – say, with respect to Iran – are not supported by others.
So we have a big stake in this, and when we get the dollar into trouble, as we have done, this is very, very fundamental. We now have China, Russia, Brazil, India, South Korea, at least, and very likely others, calling for the gradual elimination of the dollar as a reserve currency and its replacement by stages with something else – in the case of the Chinese proposal, with special drawing rights under the IMF.
I’ve seen this coming for well over a year, and have been talking about it. It’s now upon us, and it is not a problem you can send the fleet to solve. In the end, if you create a situation where people don’t want dollars, there’s nothing you can do about that. So I think this is a strategic issue.
— Interview
