In 1971, former U.S. Treasury Secretary Connery said at the first G10 meeting after the disintegration of the Bretton Woods system: "The US dollar is our currency, but it is your problem."

China Net Commentator Leshui

In 1971, former US Treasury Secretary Connery said at the first G10 meeting after the disintegration of Bretton Woods system : "The US dollar is our currency, but it is your problem." This arrogant quote has become the most vivid footnote to the hegemony of the US dollar in half a century.

On September 21, the Federal Reserve announced another rate hike of 75 basis points. This is the fifth rate hike this year by the Federal Reserve, and has raised interest rates by 300 basis points so far. The density of interest rate hikes hit the highest since 1981. Coupled with this, the USD index continues to strengthen and the currencies of other countries depreciate significantly. The US dollar index rose almost straight from 95 at the beginning of this year to 110, appreciating about 15%, hitting a record high in nearly 20 years. However, non-U.S. currencies such as the euro, pound, and yen have plummeted, causing market concerns about the world economic recession.

USD, as an "international standard currency", plays a role in measuring the value of currencies in various countries. Its every move has a significant impact on the currency value of other countries and even global financial security. As Lenin said, "Financial capital is a huge force that exists in all economic and international relations. It can be said to be a decisive force. It can even dominate and actually dominate some politically completely independent countries." From the Latin American sovereign debt crisis in 1982 to the Mexican financial crisis in 1994, and then to the Southeast Asian financial crisis in 1997. In the past 40 years, almost every regional financial crisis has broken out, and it is the US dollar behind it, and it is in the rising cycle of the US dollar. And this is not accidental.

Nobel Prize in Economics winner Stigritz once summed up incisively that the United States uses financial means to destroy and control a country usually takes the following steps: the depreciation of the US dollar - capital outflow - pushing up stock markets and housing prices in other countries - the appreciation of the US dollar - capital return - core assets of other countries plummeted - international capital returns to to buy the bottom . Looking at the past financial crises, this set of "financial combination punches" in the United States have been tried and tested.

In the 1970s, due to the impact of the two oil crises, the US economy fell into stagflation and the US dollar index continued to be sluggish. As a result, a large amount of capital poured into Latin American emerging economies such as Brazil and Argentina , promoting the rapid economic growth of Latin American countries. However, since 1982, the recovery of the US economy has stimulated the US dollar to gradually strengthen, and it also led to foreign capital withdrawal from the Latin American market. Mexico , Argentina, Brazil and other countries were unable to repay their debts because there was no inflow of new funds, so the sovereign debt crisis broke out one after another, and since then it has entered the "ten decade lost ".

Southeast Asian countries implemented a exchange rate system that pegs the US dollar in the 1980s. As the US dollar weakened in the late 1980s and early 1990s, Southeast Asian countries gained export advantages due to the continued depreciation of their own currencies and achieved economic takeoff by relying on the export processing industry. However, the US dollar has entered an appreciation cycle since 1995, and the currencies of Southeast Asian countries have also been forced to appreciate. On the one hand, this has led to a decline in its export capacity and a significant increase in its trade deficit; on the other hand, it has also attracted a large amount of international hot money to influx, quickly pushing up the bubble in the stock market and the real estate market. Finally, under the sniping of international hot money such as Soros, the currencies of Southeast Asian countries collapsed thousands of miles, and the wealth accumulated over decades disappeared in one go.

Obviously, the Fed's continuous interest rate hikes have started a new round of US dollar appreciation cycle since the beginning of this year. All signs show that similar history will be staged again. In order to cope with the impact of the subprime mortgage crisis, and the COVID-19 epidemic on the US economy, the Federal Reserve has continuously increased its quantitative easing policy for many years, and the Federal Reserve's asset size has also risen rapidly from US$893.8 billion at the end of 2007 to US$8.5 trillion in June this year, an increase of nearly 10 times. A huge amount of new capital flows into emerging market countries with faster economic growth and higher interest rates to obtain higher investment returns. However, the continued strengthening of the US dollar will inevitably lead to a large amount of capital from emerging markets returning to the United States, and even triggering some countries to fall into a sovereign debt crisis.

In April this year, Lebanon announced that its central bank and central government went bankrupt; on May 27, the African country Malawi devalued its currency by 25%; in July, Sri Lanka declared that "the country has gone bankrupt", the president and prime minister resigned one after another, and the country entered a state of emergency. In addition, the local currencies of many countries such as Venezuela , Ghana, Argentina, Turkey fell by more than 20% this year, and they also faced the risk of debt default.

It can be foreseen that as the pace of the Federal Reserve's interest rate hikes in gradually accelerates, the number of countries in debt crisis will continue to increase, and more and more global wealth will be "harvested" by the United States. As an "international standard currency", the US dollar was able to circulate all over the world, but the United States did not assume corresponding obligations to stabilize the world financial order. Instead, it used the hegemony of the US dollar to make other countries pay for it again and again, and even plundered the wealth of other countries without bloodshed. But at the same time, the US's abuse of paper money also overdraws the international credit of the US dollar, shakes the foundation of US dollar hegemony, and puts the US dollar in the so-called " Triffen dilemma ".

After World War II , in order to establish the hegemony of the US dollar, the United States had confidence in establishing the Bretton Woods system, directly linking the value of the US dollar to the gold reserve . But economist Robert Trifin keenly discovered the fatal flaw of the Bretton Woods system in the 1950s, namely an irreconcilable contradiction between maintaining confidence in the dollar and providing international settlement capacity. In short, in order for the US dollar to circulate around the world, the United States must constantly increase the supply of the US dollar and maintain the trade deficit of all year round, and at the same time ensure the simultaneous growth of gold reserves. Once gold reserves cannot keep up with the US dollar supply speed, the Bretton Woods system will collapse. In 1971, the disintegration of the Bretton Woods system confirmed Triffen's prophecy.

Although the United States implemented a floating exchange rate system after the disintegration of the Bretton Woods system, the "Triffen dilemma" was not fundamentally solved. In the long run, the flood of liquidity in the US dollar will inevitably put pressure on the US dollar, which will inevitably shake the international community's confidence in the US dollar. So we can more thoroughly understand the meaning of Connery's saying "The US dollar is our currency, but it is your problem." In fact, countries around the world, including China, have long been aware of this.

International monetary system "de-dollarization" of is imperative. In March this year, Russia announced that it would switch to rubles to when supplying natural gas to the United States and EU countries to settle the settlement in order to fight against the hegemony of the US dollar; in July, the Central Bank of India announced the launch of an international trade rupee settlement mechanism; recently, China has signed contracts with Singapore , Malaysia , and Indonesia , Indonesia , and Indonesia , and clearly began to conduct cross-border settlement in the RMB and its own currencies; recently, even Australia announced that it would use renminbi to settle iron ore trade between China and Australia.

The Fed's current round of rate hike cycle is far from over, and we cannot predict who will be the next falling domino. But for every time the US dollar overdraws its international credit, the dollar hegemony is one step closer to the end. As Michelle Woker describes in the book "Gray Rhino", the rhino is eyeing us on the distant horizon. Although it looks far away, it will come sooner or later. (Editor in charge: Hua Zhang Yuxin Yuan Jing)