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New Republic - January 28, 2020

"Defenders of the so-called “liberal international order” are likely to recoil at the decline of dollar supremacy, much as they worry that U.S. military restraint augurs the end of a “Pax Americana” that wasn’t particularly peaceful. But monetary diversity, like military restraint, is a necessary step toward a more just and peaceful world. The myth of a“capitalist peace,”in which economic integration undergirded by U.S. economic hegemony engenders mutual goodwill, remains far too common in America. The Trump administration’s deployment of dollar power should prove to all observers that there is a dark side to economic integration. The dollar may bind the United States to the rest of the world, but it does so as a means of domination."

...The United States has a long tradition of leveraging its economic power to advance its foreign policy agenda. In the early twentieth century, U.S.-imposed “dollar diplomacy” traded Latin American sovereignty for American capital and control over local customs houses. President William Howard Taft, who initiated dollar diplomacy, claimed that his strategy “substitut[ed] dollars for bullets.” According to Taft, this substitution would both advance American interests and reduce violent conflict the world over.

In actuality, dollars and bullets proved complementary: The supremacy of the dollar sustained America’s imperial adventures, while the military was often deployed to protect dollar supremacy. When Nicaragua’s Liberal Party threatened U.S. control over that country’s economy, Taft dispatched 2,500 Marines to ensure that American banks continued to service Nicaraguan debt. In the decades since, the connections between dollars and imperialism have only grown tighter. As historian Stuart Schrader has persuasively argued, the “empire of bases” that the U.S. constructed after World War II “exists to protect the dollar’s exorbitant privilege.”

In the military conflicts of the new millennium, the question of the dollar’s “exorbitant privilege” is never far from view. In October 2000, Saddam Hussein moved to switch Iraq’s oil trade from the dollar, which he termed the currency of the “enemy state,” to the euro. But the U.S. invasion of 2003 set the country’s oil industry safely back into dollar denomination, and soon after the invasion, U.S. decision-makers created a Federal Reserve account for Iraq—the very same account Trump now threatens. (“We’re an oil-producing country,” one Iraqi official remarked after Trump made his ultimatum. “Those accounts are in dollars. Cutting off access means totally turning off the tap.”)

The U.S. relationship to Iran is similarly laced with monetary tension. Back in 2007, Iranian President Mahmoud Ahmadinejad called on OPEC to pursue a “credible and good currency to take over the U.S. dollar’s role” and went so far as to establish the Iranian Oil Bourse to allow for resource exchanges in nondollar denominations. In this way, Iran challenged the dollar as a key source of U.S. power. As Ahmadinejad’s OPEC ally, Venezuelan President Hugo Chávez, said in 2007, “The fall of the dollar is not the fall of the dollar—it’s the fall of the American empire.” ...
Read full report at New Republic