The Transition from Barter Trade to Impediments of the Dollar System: One Nation, One Currency,

One Monopoly
Dr. John Taskinsoy a

ABSTRACT

Before the invention of money (coin or paper) there was barter trading, a form of exchange without
the use of a monetary medium such as coinage, paper money, or electronic cash (i.e. Bitcoin); Adam
Smith (1776) described barter trade as primitive in his seminal “The Wealth of Nations” book. Since
the 2008 global financial crisis, there has been an increase in barter trade by various countries that
are; i) heavily indebted with insufficient foreign reserves; ii) imposed sanctions by the U.S. (i.e. Iran,
North Korea, Russia, etc.); attempting to avoid the use of dollars in local, regional and international
trade; iv) interested in reducing current account and trade deficits. With growing resistance to using
US dollar in international trade by China, Russia, Turkey, Venezuela, Iran, North Korea, and Cuba; the
question is how much longer can the US dollar keep its “kingpin” currency status? According to
economist Jim O'Neill, not very long. The quick rise of Chinese economy and constant threat of Russia
will challenge the dollar dominance, and maybe the latest theatrical trade war between the United
States and China is the best or only response the U.S. was able to come up with.

Keywords: Barter Trade; Dollar Hegemony; Monopoly; Gold Rush; Sanction Power

JEL classification: C52, C53, E37, E42, E44, E51, E59, G21, G28, G32

Suggested citation: Taskinsoy, J. (2019). The Transition from Barter Trade to Impediments of the
Dollar System: One Nation, One Currency, One Monopoly (March 6, 2019). Available at SSRN:
https://ssrn.com/abstract=

 This research did not receive any specific grant from funding agencies in the public, commercial, or not-for-profit sectors.
a
Corresponding author email address: johntaskinsoy@gmail.com
Faculty of Economics & Business – Universiti Malaysia Sarawak (Unimas), 94300 Kota Samarahan, Sarawak, Malaysia

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1.0 Introduction

The prevalence of pure fiat money we use today took a long time1 (i.e. till the 20th century), during
which it had faced many rejections2 and failures as people throughout history had a skeptic approach
to the concept of literally worthless piece of paper3 used in trade as a medium of exchange for goods
(for history, see Davies (2002)). Before the invention of money (coin or paper) there was barter, a
form of exchange (i.e. trade) without the use of a monetary medium such as paper money or coinage;
Adam Smith (1776) described bartering as primitive in his seminal “The Wealth of Nations”. Since the
2008 global financial crisis (GFC)4, there has been an increase in barter trade by various countries
that are; i) heavily indebted with insufficient foreign reserves; ii) imposed sanctions by the United
States (i.e. Iran, North Korea, Russia, etc.); attempting to avoid the use of dollars in local, regional and
international trade5; iv) interested in reducing current account6 and trade deficits7.

Although bartering is both inadequate and insufficient to address complex activities in the modern
business environment, nonetheless it is on the rise worldwide since the GFC (Chapman (1980); Lithen
(2002)). Reports by Private Bartering Systems (PBS) and International Reciprocal Trade Association
(IRTA, 2009) reveal that at least one-fifth of businesses across the world engage in barter trading;
especially in adverse market conditions (i.e. economic downturn or recession), bartering is a viable
alternative to getting goods and services without paying money out of pocket. Unlike paper money
(which serves as medium of exchange, unit of account, and store of value), the terms of a barter deal
must be negotiated till an agreement reached by all parties involved (Cellarius (2000); Hennart
(1990); Kaikati (1976); Orme (2004)). The speed of economic theory development and the evolution
of money accelerated in the 20th century; Classical economic theory (pre-1930s), Keynesian theory
(1930s), Monetarism (late 1950s), Neoclassical theory (1970s), New Keynesian theory (1980s).

1 First paper money was used by the Chinese Tang Dynasty during A.D. 618-907 (for a historical perspective, see Cipolla
(1976); Cook (1958); Dalton (1967)); however Excessive issues of printed money in China caused hyperinflation, leading
to the elimination of paper money in 1455 (also see Taskinsoy, 2019a).
2 The Mongol IlKhans founded the Il-Khanid dynasty in 1256 and captured Baghdad and Iran in 1258. IlKhans introduced

paper money in Iran but failed to alter Persians’ perception that paper money had value (Tullock, 1957).
3 Before the invention of paper, various materials such as leather, parchment, cloth, and wood were used.
4 See Atkinson et al. (2013) for costs and consequences of the GFC; Beachy (2012) for the GFC’s lessons; Claessens & Kose

(2013) for the GFC’s implications; Gorton (2008) for the panic of the GFC; Grima (2012) for the derivative misuse; Iwaisako
(2010) for adverse effects of shadow-banking; and Helleiner (2011) for the lessons learned. Also see, Taskinsoy (2012;
2018a; 2018b; 2019b) for financial stability as a central focus through Basel III and the IMF’s revamped FSAPs.
5 Due to the U.S. abuse of sanction power and adverse effects of the dollar on economies of other nations, countries formed

associations, besides the European Union (EU) of 28 nations in Europe; BRICS (Brazil, Russia, India, China and South
Africa), ASEAN-5 (Indonesia, Malaysia, Philippines, Singapore, and Thailand); see Taskinsoy (2013a; 2013b).
6 Top 10 countries with largest current account deficit (2017, billion US dollar); the U.S. ($462), the UK ($91.4), Canada

($55.6), Turkey ($39.9), Brazil ($29), France ($28.9), Algeria ($22.9), Argentina ($22.1), Australia ($21.7), Egypt ($19.8).
7 Top 10 countries with the largest trade deficit (2017, billion US dollar); China ($357), Mexico ($76), Japan ($20), Germany

($56), Ireland ($39), Vietnam ($38), Italy $28), Malaysia ($21), India ($21), and South Korea ($21).

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Bartering is the oldest form of trade (i.e. dates back to the prehistoric people), however trade became
simple and widespread with the creation of money which has evolved from coinage (i.e. silver, gold,
copper, etc.), paper (banknote), credit (i.e. credit cards, revolving business line of credit, debit cards,
etc.) and virtual (i.e. Bitcoin) crypto-currencies (Smith, 2008). Trade can be conducted as bilateral
between two individuals, companies, or nations and multilateral involving more than two parties (for
a historical overview, see Davies (2002); Dollar & Kraay (2004); Beckwith (2011) Samuelson (1939);
Curtin (1984)). A chorus of economists and historians suggest that the Great Depression of 1930s was
largely contributed by the lack of free trade and the resultant stagnation and inflation; as a result,
institutions were set up as part of the 1944 Bretton Woods Agreement8 (Bordo et al. (2017); Garber
(1993); Dooley et al. (2004); Bordo (1993). As the worlds trade volume increased substantially in the
post-WWII era, isolationist beggar thy neighbor policies9, trade zones and currency blocks began to
impede trade growth (Eichengreen & Irwin, 2010) and that prompted countries to sign bilateral free
trade agreements either to reduce or eradicate previously set trade barriers10 (FTA).11

As the world trade advanced and expanded in the late 19th and throughout 20th centuries, various
types of crises had occurred (i.e. currency, banking, economic, and financial); in turn, economists were
prompted to develop proper theories to understand/interpret economic behaviors and then create
tools and models to solve the types of problems that caused economies to behave in a particular way.
Adam Smith (The Wealth of Nations12) is considered to be the grandfather of classical economics,
followed by the thinkers such as Jean-Baptiste Say, David Ricardo, Thomas Robert Malthus, and John
Stuart Mill, who worked on the self-regulating market economy theory; according to Smith (1776),
self-regulation is governed by the “invisible hand”, his famous metaphor for the free market economy
fostered by the efficient use of labor (via optimal division) and the best allocation of the accumulated
capital. Classical economists, departing from mercantilists (favoring protectionism) and Ricardian
economics (and later Marxian economics), believe in free trade and object to intervention as well as
governments turning into monopolistic states (see Cochrane (1970); Samuelson (1939; 1959); Hicks
& Hollander (1977); Screpanti & Zamagni (2005); O'Sullivan & Sheffrin (2003)).

8 The International Monetary Fund (IMF), the International Bank for Reconstruction and Development (IBRD) which later
divided into the World Bank and Bank for International Settlements (BIS). To promote and regulate international trade,
in 1947, a total of 23 countries agreed to the General Agreement on Tariffs and Trade (GATT).
9 Own country trying to solve its own problems on the expense of other countries (i.e. what the U.S. is doing currently).
10 Some of the barriers include but not limited to tariffs, quotas, sanctions, subsidies, embargos, regulations, etc.
11 Free trade became increasingly popular in the late 20 th century thanks to; European Union lifted barriers domestically

(1992); the North American Free Trade Agreement (NAFTA) took effect in January 1, 1994; the GATT became the World
Trade Organization (WTO) in 1994; most favored nation (MFN) trading status took effect in 1995 among WTO member
countries; in 2002, Economic Community (EC) became the Economic and Monetary Union (EMU).
12 The Wealth of Nations (1776) was abbreviated from the original title “An Inquiry into the Nature and Causes of The Wealth

of Nations”. This seminal book surfaced in the midst of an era where feudalism was leaving its place to capitalism which
was fueled by the Industrial Revolution (see Smith (1776); Hollander (1987; 2000); Cochrane (1970)).

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Keynesian economics, developed by the British economist John Maynard “Baron” Keynes in response
to the Great Depression of the 1930s, focused on aggregate demand as opposed to aggregate supply
at the center of classical economics. Further, Keynesian economists are pro government intervention
through monetary policy and fiscal policy actions before, during, and after economic recessions and
depressions (Keynes, 1936). They argue that these policy actions are necessary to restore confidence
and stabilize the steady state output mainly generated by the private sector (also see, Dimand (1988);
Ambrosi (2003); Markwell (2006); Fletcher (1989); Sweezy (1946); Gordon (1990); Hazlitt (1995)).
The Great Depression provided a rare lab environment opportunity for Keynes to put his theory into
empirical validation. During 1930-33, the U.S. financial system imploded by a series of banking panics;
Friedman and Schwartz (1963), Bernanke and Gertler (1995), and Eichengreen (2003) argue that the
Fed’s untimely and misguided tight-money policies caused the 1929 stock market crash, a recession13,
and inevitable depression that left behind an appalling financial dismay worldwide (Margo, 1993).
Conversely, Epstein and Ferguson (1984) stress that the Fed’s utmost task was to curtail speculation
on Wall Street bubble, therefore they believe that the monetary tightening was necessary.

Although the First World War (WWI) was described as “the war to end all wars”, unresolved problems
of WWI (i.e. Germany’s - Adolf Hitler’s grievances to the Treaty of Versailles14) unfortunately left the
door wide open for the Second World War (WWII). The United States preferred not to enter WWI, the
President Woodrow Wilson used the existing non-intervention policy in the presidential campaign,
and he was elected in 1916 for a second term (Chickering (2004); Clark (2014); Karp (1979); Martel
(2003)). However, the U.S. non-intervention policy changed prior to entering WWII (i.e. escalating
tensions between Japan and the U.S.); the Imperial Japanese Navy’s attack on Pearl Harbor ended the
isolationist sentiment in the U.S., which immediately reciprocated by declaring war upon Japan on
December 8, 1941 (Schaller (1976); Smith (1978); Steiner (2011)).15 In 1944 before the conclusion
of WWII, there were two competing proposals for the new monetary order in the post-WWII era; the
influential British economist John Maynard Keynes’ UK plan of the “Clearing Union” (which extends
credit to nations) and a new supranational (global) reserve currency he called “bancor”; and senior
economic advisor Harry Dexter White’s US plan of a United Nations Stabilization Fund and unita (a
monetary unit of accounting).16 The U.S. dollar as international currency was inaugurated at the 1944
Bretton Woods, see Bordo (1993), Bordo and Naef (2017), Dooley et al. (2004), Garber (1993).

13 The National Bureau of Economic Research (NBER) defines a cyclical decline, or recession, as a period of decline in output
across many sectors of the economy which typically lasts at least six months (e.g. Cole & Ohanian, 1999).
14 The Treaty of Versailles was unjust which put a very harsh burden on German people, forcing Germany to pay large war

reparations considered "extreme immoderation". Germany made its last WWI reparation payment on October 3, 2010.
15 Canada declared war on Japan on December 7, 1941; the UK declared nine hours before the U.S. did on December 8.
16 As a compromise between Keynes’ and Dexter’s plans, the International Monetary Fund (IMF) was established; and

instead of bancor and unita, the IMF created the Special Drawing Rights (SDR) to provide global liquidity.

4
1.1 The U.S. Dollar to End All Currencies

Before the Italian explorer Christopher Columbus discovered America in 149217, there were already
people on the continent (i.e. Native Americans) who used barter as well as animal skin and wampum
(i.e. white shell beads) as a medium to exchange goods (Davies, 2002). Strange enough, even the name
of the U.S. monetary unit “dollar” was derived from a non-English word “thaler”18 which was the short
name for the first silver coins minted in 1519 in Joachimsthal; as part of the silver standard, coins
were used during 16th – 18th centuries by nations in different continents, they were also called “silver
dollar” (Newman, 1990). The U.S. dollar was not even in circulation until the late 18th century (1792),
plus the dollar as an international currency was only established in the post-WWII.

A shortage of the British coinage in North America forced its 13 colonies to use a variety of substitutes
that included privately issued paper money. However between 1723 and 1760, excessive quantities
of paper money caused hyperinflation. Consequently, the British government steadily restricted the
rights of few colonies to issue paper money; but the ban later was extended to all colonies in 1764.
The dispute by the British government over notes was argued to be one of the primary causes of the
American Revolution War (1775-83). While the Revolutionary war was in full swing, the Continental
Congress authorized the issuance of Continental paper notes in 1775 (more like IOUs) to finance the
Revolutionary war and declared its independence from the Great Britain on July 4, 1776 (Taskinsoy,
2018c). Unfortunately, Continental paper money was redeemed at a significant discount; by 1778,
they were only worth as low as 1/7 of the original face value which later devalued at 1/40 by 1780,
and then their circulation was seized permanently in the following year (1781).19

The silver standard was in effect for about four hundred years, from the first minted thaler coins in
1519 to 1900 when the U.S. officially accepted the gold standard.20 The silver content and weight of
silver coins under the silver standard were varied across countries and continents21, for instance the
U.S. silver dollar weighed slightly lighter; 26.73 gr. as opposed to 29.2 gr. The U.S. adopted the silver

17 In a span of a decade (1492-1502), Christopher Columbus had four voyages; when he returned back to Western Europe
after each voyage, he introduced America to Europeans. During 15th and 16th centuries, influx of Europeans moved to the
new world forming the United States, Canada and Mexico. The name America was derived from the Italian Navigator
Amerigo Vespucci who had two voyages to the new world (i.e. South America) between 1499-1500 and 1501-1502.
18 The first silver coins under the name of Joachimsthaler (shortened to thaler) were minted in 1519 in Joachimsthal in the

borders of the Czech Republic. During 1600-1850, dollar (English version of thaler) was used in minted coins both in
central Europe and North America including Spanish peso (i.e. Spanish milled dollar) and Portuguese eight-real piece.
19 The Continental Congress authorized the issuance of the U.S. dollar (July 6, 1785). During the administration of President

George Washington, the US Congress passed the Coinage act of 1792 making the dollar as the unit of account.
20 See "Gold Standard Act of 1900". The Statutes at large of the United States of America. Washington: Government Printing

Office. 1901. pp. 45–50.

21 The silver thaler coin had a fixed weight of 29.2 grams and the U.S. silver dollar weighed 27.0 grams. US Morgan Dollar

was designed by George T. Morgan (1878-1921) contained 90% Silver - 10% copper, and weighed 26.73 gram.

5
standard in 1785 (i.e. Spanish milled dollar was accepted as legal tender), but from 1860 to 1871
there were attempts to create a bimetallic standard for the US dollar. Towards the end of 18th century,
the newly independent United States established several banks (1780-1791) and the Philadelphia
mint (1794), but minting operation stopped after three years on account of silver shortage. As a result,
in 1797 the U.S. government extended legal tender to foreign coins (British pound and Spanish peso)
for an indefinite period of time. The U.S. Congress passed the Coinage Act of 1834 to adjust the silver
to gold ratio from 15:1 to 16:1, this move made the U.S. gold cheaper than the world market price. As
a consequence, the U.S. exported silver therefore silver coins in circulation diminished in 1873-1900;
however, the influx of silver led to the issuance of silver certificates during 1878-1963 (see Bernanke
(2004); Bogart (1930); Cecco (1984); Eichengreen (2009; 2011); Friedman & Schwartz (1963)).

Although the United States was on a bimetallic standard, the US Coinage Act of 1834 fixed the value
of the dollar at $20.67 per ounce of gold. In order to finance the Civil War (1861-65), the US Congress
authorized the issuance of fiat money (i.e. dollar) without convertibility to silver, gold, or any other
metal with intrinsic value (this is actually how dollar is today, no convertibility). Unofficially, in 1873
the U.S. abandoned the silver standard and embraced the gold standard (see Eichengreen & Flandreau
(1997); Bordo & Schwartz (1984); Bordo (1993); Flandreau (2004)). Officially, the U.S. accepted the
gold standard in 1900; nevertheless, the classical gold standard (1900-1913) was interrupted by the
outbreak of WWI (1914-18), causing many countries in Europe to suspend22 or abandon it; Germany
went off the gold standard in 1914 (see Cooper (1982); Drummond (1987); Flood & Garber (1984);
Serrano (2003)). A significant number of new commercial banks23 entered the US financial system
during 1830-1861, this amplified the default risk. Subsequently, repeated bank failures in New York
called for structural banking and monetary reforms; in response to public outcry, the Federal Reserve
System24 (1913) was created with the utmost objective of restoring confidence, insuring financial
stability, and providing effective banking regulation and supervision (Bordo, 2007).25

The seeds of the American primacy and the dollar’s monetary hegemony26 was planted at the 1944
Bretton Woods Conference (Kirshner, 2008), where the value of the dollar was set at $35 per ounce

22 Due to increasing economic turbulence in Europe, many governments suspended convertibility to silver or gold.
23 The number of banks increased more than fivefold between 1830 and 1861, 330 and 1,601 respectively.
24 The United States did not have a central bank prior to the Fed (1913). For two decades (1791-1811), the first Bank of the

United States was chartered by the newly independent federal government to monitor the new issue of bank notes by
other banks, however the bank’s charter was not extended due to heavy political opposition. The second Bank of the
United States (1816-1836) interestingly lasted only two decades, and faced a similar opposition as the first bank.
25 The Swedish Riksbank, established in 1668 as a joint stock, is considered to be the first central bank. The Bank of England

(1694), also established as a joint stock, was the most important central bank of the era (see Bordo, 2007).
26 The U.S. dollar’s hegemonic nature is solidified by other supporting elements of American supremacy; as such, economic

power (i.e. the world’s largest economy with over $20 trillion), technological power (the world’s leading top multi-billion
dollar companies are US origin), military power (i.e. the most advanced), and petrodollar (oil is traded in USD).

6
of gold. Two events were crucial in dollar’s path to becoming the world’s main reserve currency; first,
the dollar’s main competition pound sterling was eliminated when Maynard Keynes ridded the UK of
the reserve currency status (Eichengreen & Flandreau, 2009) and its imperial grandeur or preference
(Aizenman & Lee (2005); Eichengreen, (2009); Boughton (2006); Dooley et al. (2004); Hudson
(1972)). Second, runs on gold stemming from speculative attacks in 1971 drained the U.S. gold stock
(i.e. the dollar was devalued to $42.22 per ounce of gold); subsequently, President Nixon was
prompted to terminate the dollar’s link to gold (see Flood & Garber (1984); Grilli (1986); Obstfeld
(1984); Bell (1956); Triffin (1960); Rueff (1965); Kindleberger (1965); Davies (2000)).

With the sudden collapse of the Bretton Woods system of fixed exchange rates pegged to the dollar,
the United States became the world’s central bank to provide global liquidity. The bad news was that
the negative side effects of the Bretton Woods’ failure coupled with unfolding macroeconomic events
rattled markets worldwide in the early 1970s. Keynesian economics lost influence due in large part
to stagflation and very high inflation in many countries despite interventions by their governments.
Besides the failure of Germany’s Herstatt Bank in 1974 (which had systemic effects), the Organization
of the Petroleum Exporting Countries (OPEC) sharply raised the oil prices in 1973 as a retaliation to
the U.S. for its aid to Israel during the Arab-Israeli conflict and the subsequent Yom Kippur War in
1973. The economic turmoil was so severe in many countries that even US President Nixon’s proclaim
“I am now a Keynesian in economics” failed to help it from falling out of favor.

Economic theories in the late 18th century through the mid-19th century had contributed to the fast
evolution of the U.S. dollar and its remarkable transformation in becoming the world’s main reserve
currency. With the help of classical economic theory (e.g. Smith (1776); Hicks & Hollander (1977);
Hollander (2000); Samuelson (1959)), people under a monarch rule (i.e. feudalism) were motivated
to become consumers in the newly transitioned capitalistic democracies where markets were left to
self-regulation (laissez-faire); further, classical economists advocated no government intervention, a
practice that was associated with meritocracies. Keynesian economists refute many notions of the
classical economics; as such, supply-side economy, no government intervention, self-regulation, low
wages and full employment, and natural state of equilibrium (Keynes (1919; 1936; 1969); Markwell
(2006); Dimand (1988)). Keynes advocates government intervention (i.e. countercyclical policies),
and argues that economies tend to expand and contract (i.e. boom-bust-cycles) and may not return to
a natural state of equilibrium. According to monetarists (Friedman (1967); Friedman & Schwartz
(1963); Bernanke (2005; 2013)), supply of money is at the center of economic growth, and monetary
policy is used by central banks to reduce or contract the aggregate money supply. Neoclassical and
new Keynesian economics were developed in the 20th century to complement their antecedents.

7
1.2 The United States in 2050

The United States’ abuse of sanction power in recent years together with the rise of Chinese economy
(i.e. as of 2014, China passed the US as the largest economy in PPP (purchasing power parity)), wishful
folks have actually begun to believe that the dollar’s days are numbered. In this millennium alone, the
U.S. has imposed as many as 60 sanctions on 35 countries (i.e. Russia, Iran, Sudan, Venezuela, North
Korea, Cuba, China, Qatar, etc.). However, many economists and historians believe that sanctions in
most instances are counterproductive and damaging for the economies of all nations involved. For
the past two decades, sanctions imposed on Iran and North Korea have proved to be non-deterrent
in the behavioral change of offenders (Martin (1990); Rogers (1996); Pape (1997)).

Modern gold rush generates new hopes to end US dollar dominance; in fact, since the late 1990s (i.e.
Asian crisis), China and Russia (and Turkey in recent years) have been aggressively accumulating gold
reserves to mitigate potential adverse effects of the US dollar. As of January 2018, Russia had massive
gold reserves valued at $455.2 billion which surpassed China’s 1,843 tons by end-2017 (Figure 1).27

Table 1: World Gold Mine Production Survey 2018

Gold Mine Gold Mine Gold Total %
Production Production Reserves Reserves Held in
2016 (tons) 2017 (tons) (tons) (US$ bn) Gold
United States 222.0 230.0 8,134 452.8 75.2
Germany ----- ----- 3,374 200.6 70.4
IMF ----- ----- 2,814 ----- -----
Italy ----- ----- 2,452 151.6 67.7
France ----- ----- 2,436 156.8 65.1
China Mainland 453.5 426.1 1,843 3,236.0 2.4
Russian Federation 253.6 270.7 1,839 433.1 17.8
Switzerland ----- ----- 1,040 811.2 5.4
Japan 6.5 6.1 765 1,264.3 2.5
Turkey 26.0 26.1 565 107.8 21.9
Total Europe 306.1 326.5 ----- ----- -----
Total North America 520.1 536.3 ----- ----- -----
Total South America 556.7 541.3 ----- ----- -----
Total Asia 909.6 860.9 ----- ----- -----
Total Africa 594.9 613.6 ----- ----- -----
Total Oceania & Other 364.0 368.0 ----- ----- -----
Total World 3,251.4 3,246.5 ----- ----- -----
Source: GFMS, Thomson Reuters; IMF

The U.S. by far has the largest gold reserves (8,134 tons), nearly 2.5 times more than Germany and
over four times of Russia. China has massive foreign reserves but only 2.4% (or about $80 billion) of
that is held in gold. Countries (China, Russia, and Turkey) which the U.S. imposed sanctions have been
accumulating gold reserves since 2013 to alleviate the US dollar’s negative effects.

27 https://www.rt.com/business/422022-gold-origins-discovered-space/ (accessed January 24, 2019).

8
 A. World Gold Supply B. World Gold Demand

C. China Leads India as World’s Largest Gold Consumer D. Chinese Demand for Gold Bars

E. United States Jewelry Imports and Gold Price F. Turkish Net Official Sector Holdings

G. Russian jewelry Fabrication and Scrap H. Gold Price in Us Dollar and Ruble Terms
Source: GFMS, Thomson Reuters
Figure 1: GFMS Gold Survey 2018

9
Although many countries worldwide are currently facing economic downturn attributable to the U.S.
- China trade war, currency devaluations, and global imbalances; nonetheless, the world economy is
still projected to expand by an average of 3% per annum in the period of 2019-2050. With this rate
of growth, the world GDP is estimated to double in the next two decades (by 2038) and triple by 2050,
however this will mean that rich and powerful countries will get richer while poor countries will get
even poorer (i.e. 30 largest economies will account for over 80% of the world GDP by 2050). If some
of the new emerging economies28 strongly commit to fiscal and structural reforms and improve their
economic, political, legal, and social landscapes; by 2030, Mexico, Indonesia, and Turkey can pass UK,
France, and Italy respectively (in PPP terms). Similarly, under the abovementioned assumption India
can potentially become the world’s second largest economy by 2050 in PPP terms.29

Table 2: GDP at PPP Ranking

$USD, Billion (2014)
PPP GDP at PPP GDP at PPP GDP at PPP
Country Country Country
Rank 2014 ($bn) 2030 ($bn) 2050 ($bn)
1 China 17,632 China 36,112 China 61,079
2 United States 17,416 United States 25,451 India 42,205
3 India 7,277 India 17,138 United States 41,384
4 Japan 4,788 Japan 6,006 Indonesia 12,210
5 Germany 3,621 Indonesia 5,486 Brazil 9,164
6 Russia 3,559 Brazil 4,996 Mexico 8,014
7 Brazil 3,073 Russia 4,854 Japan 7.914
8 France 2,587 Germany 4,590 Russia 7,575
9 Indonesia 2,554 Mexico 3,985 Nigeria 7,345
10 United Kingdom 2,435 United Kingdom 3,586 Germany 6,338
11 Mexico 2,143 France 3,418 United Kingdom 5,744
12 Italy 2.066 Saudi Arabia 3,212 Saudi Arabia 5,488
13 South Korea 1,790 South Korea 2,818 France 5,207
14 Saudi Arabia 1,652 Turkey 2,714 Turkey 5,102
15 Canada 1,579 Italy 2,591 Pakistan 4,253
16 Spain 1,534 Nigeria 2,566 Egypt 4,239
17 Turkey 1,512 Canada 2,219 South Korea 4,142
18 Iran 1,284 Spain 2,175 Italy 3,617
19 Australia 1,100 Iran 1,914 Canada 3,583
20 Nigeria 1,058 Egypt 1,854 Philippines 3,516
21 Thailand 990 Thailand 1,847 Thailand 3,510
22 Egypt 945 Pakistan 1,832 Vietnam 3,430
23 Poland 941 Australia 1,707 Bangladesh 3,367
24 Argentina 927 Malaysia 1,554 Malaysia 3,327
25 Pakistan 884 Poland 1,515 Iran 3,224
Source: PricewaterhouseCoopers (PwC)
Notes: The U.S. has lost its global leader position as the largest economy to China in 2014 in terms of PPP.
Looking at Table 2, by 2050, India overtakes the US as the second largest economy (in PPP). For this reason,
the US abuse of sanction power along with its foreign policies towards some countries are not surprising.

28 PricewaterhouseCoopers (PwC) refers to the seven largest global economies (G7); the US, Japan, Germany, the UK, France,
Italy and Canada; plus Australia, South Korea and Spain among the current advanced economies. The seven largest
emerging market economies (E7); China, India, Brazil, Russia, Indonesia, Mexico and Turkey.
29 See “The World in 2050 Will the shift in global economic power continue?” (PwC, www.pwc.co.uk/economics)

10
2.0 Literature Review

The evolution of American imperialism and dollar’s hegemony are closely interlinked, understanding
the latter requires knowledge of the former; therefore, a brief history would be informative. Maybe
not in classic sense, but the question of “is the U.S. an empire?” is not the right one; a better question
to ask is, “what kind of an empire is the U.S.?” because the answer to the first question is already yes.
Imperialism is in America’s DNA even before birth; when European settlers arrived in the new world
and began killing to gain land (i.e. Indian massacre), right then the seeds of an imperial nation were
planted. In that regard, the United States since the late 19th century has been accused repeatedly by
many and advocated by US Presidents (i.e. Thomas Jefferson and Benjamin Franklin) of hegemony,
contemporary imperialism, American imperialism, and neocolonialism (see Lens & Howard (2003);
Field (1978); LaFeber (1993); Sexton (2011); Williams (1980); Kramer (2006); Zinn (2003; 2014);
Steigerwald (1994); Johnson (2004)). The U.S. has used doctrines as a method of expansionism.

The Monroe Doctrine of 1821 with “manifest destiny”30 (coined by newspaper editor John O'Sullivan
in 1845) resulted in the U.S. territorial expansion31 (1812-1860) and American exceptionalism, which
had the objective of keeping European colonial powers away from the Americas (Dunning (2001);
Brown (1980); Fresonke (2003); McDonough (2011); Sampson (2003)). The Monroe Doctrine and
manifest destiny played an important role in the annexation of Oregon and Washington (i.e. Treaty of
1846), Texas (which declared independence from Mexico in March 1836, and admitted to the Union
in 1845). At the conclusion of the Mexican-American War of 1846, the 1848 Treaty of Guadalupe
Hidalgo gave California and New Mexico to the United States; other claimed territories included Utah,
Nevada, Arizona, Wyoming, and Colorado (for historical overview, see Adams (2008); Bailey (1937);
Cheery (1998); Greenwood (2007); Hudson (2001); Hietala (2003)).

Manifest destiny served the U.S. extremely well in its American exceptionalism, but at the same time
caused serious consequences for Native Americans who, in the process, ended up losing massive
amount of their native land. White settlers moving from east to westward meant removal of Indians
via occupation, annexation, and wars. During Washington administration, the federal government
whenever possible purchased land from Native Americans through treaties with tribal leaders (e.g.
Miller (2006); Mountjoy (2009); Weeks (1996)). As Americans generally believed the future devolved
upon America, temporarily paused expansion was revived again after the US Civil War (1861-65).

30 Advocates believe that the United States is destines (by God) to expand its control across the Americas. According to
historian William E. Weeks, advocates of manifest destiny believe in: i) the virtue of the American people and their
institutions; ii) the mission to spread these institutions, thereby redeeming and remaking the world in the image of the
United States; iii) the destiny under God to do this work (Weeks, 1996).
31 Before the manifest destiny, the US Congress approved the Louisiana Purchase in 1803.

11
The U.S. expansionism through intervention and annexation became its tradition with the Spanish-
American War in 1898.32 After the war ended (August 12, 1898), the treaty of Paris (December 10,
1898) was signed, which ended Spanish colonial rule in Americas and resulted in the U.S. acquisition
of new territories in western Pacific and Latin America such as Puerto Rico, Philippines, and Guam
(Corbin & Levitsky, 2003). The emergence of the U.S. as an imperial power made her crave more, next
milestone was winning insular possessions in the Caribbean and Hawaii and playing a leading role in
the restructuring of power in Europe (previously, power was shared by Germany, France, and the UK
which were also each other’s chief enemy). Although the United States was created from European
settlers initially and from immigrants later, patently Europe and America diverged in many aspects.
While the EU has moved towards “perpetual peace”, conversely the U.S. has turned into an anarchic
Hobbesian33 enabled by its strong economy and military might (the upshot is the US abuse of sanction
power). The Divergence between Europeans and Americans can be best explained by the metaphor
“men are from Mars (Americans) and women are from Venus (Europeans) (e.g. Kagan, 2003).

Following the collapse of the Soviet Union (USSR), not only the United States emerged from the Cold
War as unrivaled without any counterbalancing or restraining international power, but assumed the
role of producing a new world order at the 1944 Bretton Woods Conference (e.g. Ikenberry, 2005).
The United States extended its remarkable war success onto other areas in the post-WWII; Harry
Dexter White’s US plan was signed by the 44 wartime allies to create IMF, World Bank, and BIS to
promote financial stability and to prevent another Great Depression (see Bordo (1993); Bordo et al.
(2017); Dooley et al. (2004); Garber (1993)). In order to preserve world peace by ways of deterrence
of Russia’s threat (as well as eradicating communism), non-wartime alliances established the United
Nations (UN) and the North Atlantic Treaty Organization (NATO). Several decades later, the U.S. and
the world are at crossroads, the U.S. will either continue its commitment to these institutions that
have been essential in its prolonged success, or as proposed, America will withdraw from the treaties
(Bacevich (2002); Beeson & Higgott (2003); Dorrien (1993); Gaddis (1982); Ikenberry (2001)).

The post-WWII economic order agreed at the Bretton Woods replaced both the gold (1791-1933) and
gold exchange standards34 (1919-29), but the Bretton Woods system with full convertibility35 only
operated from 1959 through 1968 (Bordo et al. (2017); Dooley et al. (2004)). With sudden collapse

32 In the 19th and early 20th century, the U.S. had expanded its power through purchase (Louisiana and Alaska); acquisition
(Puerto Rico, Philippines, Guam, United States Virgin Islands, American Samoa, and the Northern Mariana Islands);
annexation (Caribbean, Hawaii, Panama Canal Zone, and 525,000 square miles of Mexican land, i.e. New Mexico and
California), and occupation (Haiti and the Dominican Republic).
33 Absolute monarchy where a country (and its government) behaves as if no laws and powers to restrain its actions.
34 In the gold exchange standard, countries in their reserves hold both gold and foreign exchange assets.
35 Between the American plan and the British plan, delegates agreed on a compromise that created an adjustable peg system

to the US dollar convertible into gold at $35 per ounce along with capital controls.

12
of Bretton Woods, the dollar’s ascendancy to the throne was assured by President Nixon’s decision in
1971 to cut the dollar’s link to gold. However, Norrlof (2017) and Norrlof and Wohlforth (2017) argue
that the grand strategy of the United States is self-defeating due to deeper engagement in the Middle
East, swelling military spending and never-ending sovereign debt (i.e. over $20 trillion in 2018).

Since the US Congress chose dollar as its monetary unit in 1792, Deutsche mark, Spanish peso, British
pound sterling, Japanese yen, and Chinese yuan36 have failed to kill off, deflate, or end the dollar’s
hegemony (Table 3; 4). Events in the 1990s have fueled dollarization or currency-union formations
substantially (a bipolar view), in turn emerging economies’ gradual integration into international
trade hubs has accelerated (see Rose (2000); Rose & Frankel (2002)). New peripheries’37 elongated
addiction to U.S. dollar, the dollar’s share in global trade and reserves has experienced a huge spike.
Countries hold foreign reserves (i.e. dollar and euro in particular) for various reasons; strong foreign
reserve position is a positive indicator of financial stability; furthermore, it is a sign of country’s ability
to repay its debt obligations that become due both in the short-term and long-term. Healthy foreign
reserves can be vital at times to defend national currencies under speculative attacks prior to, during,
and in the aftermath of financial distress. As of May 2018, the following five countries are in the top
position of the list for holding most US dollars; 1) China - $3.2 trillion; 2) Japan - $1.2 trillion; 3)
Switzerland - $786 billion; 4) Saudi Arabia - $487 billion; and 5) Hong Kong (China) - $438 billion
(also, the ECB - European Central Bank is in the 6th place with $740 billion).38

Notwithstanding repeated financial crises and their farfetched implications, more than half a billion
people around the world use dollar as the main currency in their economic activity which amounts to
over $20 trillion. Besides the U.S., several other nations and territories use US dollar as their official
currency; Ecuador (since 2000), El Salvador, Marshall Islands, Micronesia, Timor-Leste, Zimbabwe
(after 2000), Palau, the U.S. territories (American Samoa, American Virgin Islands, Guam, Northern
Mariana Islands, and Puerto Rico), territories of the UK (British Virgin Islands, Turks and Caicos).39
For further discussion, see Alesina and Barro (2001), Dornbusch (2001), Persson (2001), Pakko and
Wall (2001), Shambaugh (2001), Tenreyro (2001), and Fischer (2001).

36 The IMF added Chinese yuan to the SDR basket effective October 1, 2016. Based on this update, the SDR basket consists
the following amounts of each currency: U.S. dollar (0.58252), Euro (0.38671), Chinese yuan (1.0174), Japanese yen
(11.900), Pound sterling (0.085946). https://www.imf.org/en/News/Articles/2016/09/30/AM16-PR16440-IMF-
Launches-New-SDR-Basket-Including-Chinese-Renminbi (accessed December 11, 2018).
37 New peripheries in East Asia: China, Hong Kong, Japan, Macau, Mongolia, North Korea, South Korea, Taiwan. Association

of Southeast Asian Nations (ASEAN); founding members are Indonesia, Malaysia, Philippines, Singapore, and Thailand;
other five members; Brunei Darussalam, Cambodia, Laos, Myanmar, and Vietnam. 1 Observer – Papua New Guinea.
38 https://www.thebalance.com/what-is-a-reserve-currency-1978926 (accessed December 12, 2018).
39 The U.S. dollar is also used along with local currencies in Bahamas, Belize, Barbados, Costa Rica, Nicaragua, Panama,

Myanmar, Cambodia, Liberia, St. Kitts and Nevis, territories of the Netherlands (Aruba, Bonaire, Curacao, St. Maarten, St.
Eustatius and Saba), territories of the UK (Bermuda, Cayman Islands).

13
Table 3: World Currency Composition of Official Foreign Exchange Reserves
US Dollars, Billions

2015Q1 2015Q2 2015Q3 2015Q4 2016Q1 2016Q2 2016Q3 2016Q4 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3

Total Foreign Exchange Reserves ($) 11,433 11,456 11,179 10,919 10,922 10,963 10,991 10,713 10,897 11,118 11,291 11,440 11,600 11,464 11,397
Allocated Reserves ($) 6,745 7,329 7,244 7,413 7,764 8,055 8,351 8,418 8,833 9,257 9,643 10,014 10,402 10,515 10,705
Claims in U.S. dollars ($) 4,452 4,785 4,748 4,874 5,082 5,254 5,403 5,502 5,713 5,909 6,125 6,281 6,531 6,561 6,631
Claims in euro ($) 1,350 1,458 1,434 1,419 1,518 1,563 1,643 1,611 1,703 1,847 1,935 2,019 2,118 2,129 2,192
Claims in Chinese renminbi ($) ----- ----- ----- ----- ----- ----- ----- 90.3 94.9 99.4 108.2 123.5 145.7 193.0 192.5
Claims in Japanese yen ($) 258.1 261.2 252.6 278.3 285.8 330.4 351.3 333.7 400.8 428.6 436.2 491.0 477.3 511.4 532.8
Claims in pounds sterling ($) 258.4 335.7 333.7 349.7 359.5 365.8 366.7 365.1 377.0 408.7 433.3 454.1 486.1 469.7 480.8
Claims in Australian dollars ($) 105.0 127.1 120.0 131.0 133.6 136.9 150.1 142.1 156.0 161.9 170.8 180.0 177.0 178.6 180.8
Claims in Canadian dollars ($) 115.4 130.3 126.4 131.6 140.4 147.7 159.8 163.1 167.5 178.8 192.9 202.8 193.3 200.2 208.7
Claims in Swiss francs ($) 17.8 21.4 18.3 19.8 14.9 14.4 14.9 13.9 14.7 16.0 16.5 18.1 17.9 16.6 16.6
Claims in other currencies ($) 188.4 209.8 211.3 209.7 229.5 243.0 262.0 197.3 206.1 207.3 224.8 244.7 256.5 255.0 270.0
Unallocated Reserves ($) 4,687 4,127 3,935 3,505 3,158 2,908 2,639 2,294 2,064 1,861 1,648 1,426 1,198 948.9 691.2
Shares of Allocated Reserves (%) 59.00 63.98 64.80 67.89 71.08 73.47 75.99 78.58 81.06 83.26 85.40 87.53 89.67 91.72 93.94
Shares of U.S. dollars (%) 66.00 65.29 65.54 65.74 65.46 65.22 64.70 65.36 64.68 63.83 63.52 62.72 62.78 62.40 61.94
Shares of euro (%) 20.02 19.90 19.79 19.15 19.55 19.41 19.68 19.14 19.28 19.95 20.06 20.16 20.36 20.25 20.48
Shares of Chinese renminbi (%) ----- ----- ----- ----- ----- ----- ----- 1.07 1.07 1.07 1.12 1.23 1.40 1.84 1.80
Shares of Japanese yen (%) 3.83 3.56 3.49 3.75 3.68 4.10 4.21 3.96 4.54 4.63 4.52 4.90 4.59 4.86 4.98
Shares of pounds sterling (%) 3.83 4.58 4.61 4.72 4.63 4.54 4.39 4.34 4.27 4.41 4.49 4.53 4.67 4.47 4.49
Shares of Australian dollars (%) 1.56 1.73 1.66 1.77 1.72 1.70 1.80 1.69 1.77 1.75 1.77 1.80 1.70 1.70 1.69
Shares of Canadian dollars (%) 1.71 1.78 1.74 1.78 1.81 1.83 1.91 1.94 1.90 1.93 2.00 2.03 1.86 1.90 1.95
Shares of Swiss francs (%) 0.26 0.29 0.25 0.27 0.19 0.18 0.18 0.17 0.17 0.17 0.17 0.18 0.17 0.16 0.15
Shares of other currencies (%) 2.79 2.86 2.92 2.83 2.96 3.02 3.14 2.34 2.33 2.24 2.33 2.44 2.47 2.42 2.52
Shares of Unallocated Reserves (%) 41.00 36.02 35.20 32.11 28.92 26.53 24.01 21.42 18.94 16.74 14.60 12.47 10.33 8.28 6.06

Source: IMF - Currency Composition of Official Foreign Exchange Reserves (COFER), International Financial Statistics (IFS)
Data extracted from http://data.imf.org/ on: 2/24/2019 11:30:57 AM
Notes: Total foreign exchange reserves has seen a decline in the second and third quarters of 2018, which may have been attributable to the recent trade war between China and the U.S.
Between 2015Q1 and 2018Q3, allocated reserves have increased consecutively; similarly, excluding 2015Q3, claims in US dollars have moved upward for 14 quarters. Since the introduction
of Chinese renminbi as a reserve currency in 2016Q4, the shares of dollar have declined from 65.36% in 2016Q4 to 61.94% in 2018Q3 (a shrinkage of 5.23%). During the same period, shares
of Chinese renminbi have increased by 68.22%. Shares of unallocated reserves are at the lowest level, have dropped from 41% in 2015Q1 to 6.06% in 2018Q3.

14
Table 4: Currency Composition of Official Foreign Exchange Reserves (1965-2022)
Percentage (%)
1965 1970 1975 1980 1985 1990 1995 2000 2001 2002
US Dollar 72.93 84.85 84.61 57.88 56.66 47.14 58.96 71.13 71.51 66.50
Euro (ECU – 1999) ----- ----- ----- 17.46 14.00 11.64 8.53 18.29 19.18 23.65
Deutsche Mark 0.17 1.94 6.62 12.92 13.74 19.83 15.75 ----- ----- -----
Japanese yen ----- ----- 0.61 3.93 8.69 9.40 6.77 6.06 5.04 4.94
Pound sterling 25.76 11.36 3.42 2.40 2.03 2.39 2.11 2.75 2.70 2.92
French franc 1.11 0.73 1.16 0.97 0.58 2.71 2.35 ----- ----- -----
Canadian dollar ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Australian dollar ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Swiss franc ----- 0.61 1.34 2.25 1.40 0.84 0.33 0.27 0.25 0.41
Dutch guilder ----- 0.08 0.66 0.89 0.78 1.15 0.32 ----- ----- -----
Other 0.03 0.43 1.58 1.29 2.13 4.89 4.87 1.49 1.31 1.58
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
US Dollar 65.45 65.51 66.51 65.04 63.87 63.77 62.05 62.14 62.59 61.47
Euro (ECU – 1999) 25.03 24.68 23.89 24.99 26.14 26.21 27.66 25.71 24.40 24.05
Deutsche Mark ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Japanese yen 4.42 4.28 3.96 3.46 3.18 3.47 2.90 3.66 3.61 4.09
Pound sterling 2.86 3.49 3.75 4.52 4.82 4.22 4.25 3.94 3.83 4.04
French franc ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Canadian dollar ----- ----- ----- ----- ----- ----- ----- ----- ----- 1.42
Australian dollar ----- ----- ----- ----- ----- ----- ----- ----- ----- 1.46
Swiss franc 0.23 0.17 0.15 0.17 0.16 0.14 0.12 0.13 0.08 0.21
Dutch guilder ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Other 2.01 1.87 1.74 1.81 1.83 2.20 3.04 4.43 5.49 3.26
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022
US Dollar 61.24 65.14 65.73 65.34 62.70 62.30 62.90 63.40 64.00 64.80
Euro (ECU – 1999) 24.20 21.20 19.14 19.13 20.15 20.30 20.10 19.80 19.60 19.25
Deutsche Mark ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Japanese yen 3.82 3.54 3.75 4.89 4.89 4.85 4.80 4.75 4.70 4.72
Pound sterling 3.98 3.70 4.71 4.54 4.54 4.45 4.30 4.25 4.15 4.25
French franc ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Canadian dollar 1.83 1,75 1.77 1.94 2.02 2.00 1.98 1.96 1.94 1.95
Australian dollar 1.82 1.59 1.77 1.69 1.80 1.70 1.65 1.59 1.55 1.60
Swiss franc 0.27 0.24 0.27 0.16 0.18 0.18 0.17 0.17 0.16 0.16
Dutch guilder ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Other 2.84 2.83 2.86 2.37 2.50 2.45 2.35 2.40 2.45 2.50
Source: IMF; https://en.wikipedia.org/wiki/Reserve_currency (accessed February 28, 2019).
Notes: We have estimated shares of currencies from 2019 to 2022; during which, shares of US dollar in official global allocated reserves will increase close to 65% due in
most part to the augmented uncertainty surrounding the macroeconomic environment, making the dollar flight to capital safety.

15
Shares of US dollar in allocated global official reserves are illustrated in Table 3 and Figure 2, which
indicate that they averaged 84.73% between 1970 and 1975. The dollar’s strong position was mainly
contributed by instability-inflicting macro events; the sudden collapse of the Bretton Woods system
of fixed exchange rates in the early 1970s; the Arab – Israeli conflict and the subsequent Yom Kippur
War in 1973; the failure of Germany’s Herstatt Bank in 1974 (i.e. in systemic nature), and the oil prices
in 1973 were raised sharply by the Organization of the Petroleum Exporting Countries (OPEC). For
the past three decades, the dollar’s share for the first time fell below 50% in early 1990s, but following
the Asian crisis of 1997, moved back to over 70%. Excluding the year 2001, the dollar’s share in global
official reserves has stayed below 70% mark (i.e. in the low 60s since 2007). Despite the fact that euro
replaced a number of national currencies in eurozone, euro’s 20.3% share of foreign reserves only
had a miniscule impact on the dollar’s hegemonic status. With the rise of Chinese economy (i.e. second
largest in the world after the U.S.), wishful folks have actually begun to believe that the dollar’s days
were numbered; however, yuan’s impact was unnoticeable (i.e. not even half of one percent).

Source: Taskinsoy (2018c); IMF: http://data.imf.org/?sk=E6A5F467-C14B-4AA8-9F6D-5A09EC4E62A4

Figure 2: USD Share of Allocated Global Official Reserves

The adoption (January 1, 1999) and introduction (January 1, 2002) of Euro banknotes barely had any
effect on dollar’s status as the world’s main reserve currency. However following each major crisis
originated in the United States, dollar’s share of allocated global reserves was reduced. US Savings
and loan crisis (1980s and early 1990s) in conjunction with the 1987 stock market crash prompted
nations to reduce their dollar denominated reserves (shares of dollar in global reserves dropped to

16
the lowest level of 47% which was not seen in the post-WWII. Similarly, burst of the dot.com bubble
in 2001 coupled with the global financial crisis of 2007-08 pushed dollar’s share into low 60% range.

Throughout history, there have been numerous international currencies40, but no fiat currency has
been more dominant than the U.S. dollar as the undisputed world’s reserve currency for a century
(Figure 3). The former Fed Chairman Alan Greenspan (2007)41 along with Chinn and Frankel (2006)
claimed that by 2020 euro could dethrone the U.S. dollar as the world’s main reserve currency. There
are mixed views regarding adverse effects of a single reserve currency; advocates argue that dollar
will continue to dominate the global economy due to network externalities (i.e. contagion or network
effects). Opponents (including the influential British economist John Maynard Keynes) refute the idea
of a single dominant reserve currency (also see, Côté (1994); Rose (1999)).

Source: http://bmg-group.com/irreversible-trends-driving-gold-10000/ (accessed February 27, 2019)

Figure 3: Global Reserve Currencies since 1450

The U.S. dollar continues to rule both international trade and foreign exchange market. Still today,
circa 90% of daily forex trading volume involves the U.S. dollar (Figure 4). Half of the world’s 185
currencies are in a tight trading range to the dollar. Another interesting fact to know is; approximately

40 Greek drachma, Roman denari, Byzantine solidus, Arab dinar, Venetian ducato, and Florentine florin. With colonialism
from 17th to 19th centuries, Dutch guilder, French franc, and British pound sterling were widely held currencies.
41 “The euro could replace the U.S. dollar as the world’s primary reserve currency”

https://www.reuters.com/article/greenspan-euro/euro-could-replace-dollar-as-top-currency-greenspan-
idUSL1771147920070917

17
$1 trillion U.S. bills are in circulation, and about 60% of that ($600 billion) is used outside the U.S. in
countries (i.e. Russia) where economies are surrounded by risks. Because the United States has the
largest and most liquid bond market (over $21 trillion), virtually all central banks choose to stash
over $6 trillion dollars of reserves in the U.S. bond market to earn interest.42

Source: Taskinsoy (2018c)

https://bullmarketz.com/the-10-most-traded-currencies-in-2018/ (accessed February 25, 2019).
Figure 4: 10 Most Daily Traded Currencies in 2018

The United States is poles apart from its humble beginnings; over 200 years ago, the Revolutionary
War (1775 – 1783) ignited a spark and only a century later, the United States has emerged as a world
power. Since the late 19th century (i.e. Spanish-American War of 1898), American primacy (i.e. also
referred to as American imperialism or exceptionalism) and the dollar’s hegemony are backed by the
U.S. military might which happens to be the world’s most powerful and advanced (initially, US Navy
was central to the military dominance). Despite military spending cuts plus ever more growing rivals
from China and Russia, according to a report from Credit Suisse43, the United States still ranks the
world’s strongest military whereas Canada has the weakest military among the world’s 20 strongest
militaries. In conjunction with the undisputed military dominance, the United States is also dominant
in economic, technological, cultural, and political landscapes of the world. American exceptionalism
(i.e. perfect dominance) has made the U.S. the world’s most valuable nation brand (Table 5).

42 The size of the world’s bond markets as follows: the U.S. - $21.5 trillion; Eurozone (total) - $11.7 trillion; Japan - $9.8
trillion; China - $4.6 trillion; Italy - $2.7 trillion; France - $2.7 trillion; the UK - $2.7 trillion; Germany - $2.4 trillion; Spain
- $1.4 trillion; Brazil - $940 billion; Belgium - $550 billion; Netherlands - $500 billion; Singapore - $387 billion; Greece -
$378 billion; Austria - $338 billion. See https://www.quora.com/topic/U-S-Dollar
43 Report on globalization from Credit Suisse: RANKED: The world's 20 strongest militaries;

https://www.businessinsider.com/these-are-the-worlds-20-strongest-militaries-ranked-2015-9

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Table 5: The Most Valuable Nation Brands
US Dollar, Billion ($bn)

Rank Rank Brand value Change Brand value Brand rating Brand rating
Nation Brand
2018 2017 2018 ($bn) % 2017 ($bn) 2018 2017
1 1 United States 25,899 23 21,055 AAA AAA-
2 2 China 12,779 25 10,209 AA AA
3 3 Germany 5,147 28 4,021 AAA AAA-
4 5 United Kingdom 3,750 20 3,129 AAA AAA
5 4 Japan 3,598 5 3,439 AAA- AAA-
6 6 France 3,224 9 2,969 AA+ AA+
7 7 Canada 2,224 8 2,056 AAA- AAA-
8 9 Italy 2,214 9 2,034 AA- A+
9 8 India 2,159 5 2,046 AA AA
10 10 South Korea 2,001 8 1,845 AA AA
11 11 Australia 1,669 11 1,505 AAA- AAA-
12 12 Spain 1,606 14 1,410 AA AA
13 15 Netherlands 1,190 18 1,005 AAA AAA
14 13 Mexico 1,066 2 1,049 A+ A+
15 14 Switzerland 973 -4 1,014 AAA+ AAA+
16 16 Indonesia 848 0 845 AA AA-
17 18 Brazil 840 5 798 A A
18 17 Russia 830 0 832 A+ A+
19 19 Sweden 749 7 703 AAA- AAA
20 21 United Arab Emirates 707 19 594 AAA AAA
21 22 Saudi Arabia 677 18 575 AA AA
22 20 China (Taiwan) 675 8 625 AA+ AA+
23 23 Poland 654 14 571 AA- AA-
24 26 Belgium 643 17 548 AA+ AA+
25 25 Norway 595 8 550 AAA AAA
26 28 Austria 577 19 484 AAA- AAA-
27 33 Ireland 538 26 427 AAA- AAA-
28 31 Singapore 530 14 464 AAA+ AAA+
29 30 Philippines 524 12 466 A+ A+
30 27 Malaysia 523 7 489 AAA- AAA-
31 29 Thailand 509 5 483 AA AA-
32 32 Denmark 492 8 453 AAA- AAA-
33 34 Chine (Hong Kong) 414 14 364 AAA AAA
34 24 Turkey 382 -33 570 A+ A+
35 38 Czech Republic 365 22 299 AA AA
36 35 Finland 352 9 322 AAA AAA
37 36 Argentina 336 7 314 A A-
38 37 Chile 310 3 301 AA+ AA
39 44 Bangladesh 257 24 208 A A-
40 42 Qatar 256 15 223 AAA- AAA
41 40 Colombia 254 6 239 A A+
42 41 Israel 248 11 224 AA+ AA+
43 45 Vietnam 235 16 203 A+ A+
44 39 Iran 234 -7 250 A+ A+
45 49 Romania 222 27 175 A A
46 46 New Zealand 214 8 199 AAA AAA
47 51 Kuwait 209 23 170 AA- AA-
48 48 Portugal 208 15 281 AA AA
49 43 South Africa 207 -7 222 A+ AA-
50 47 Nigeria 203 6 191 A A
Source: BrandFinance: The annual report on the most valuable nation brands (October 2018)
www.brandfinance.com accessed March 1, 2019)
Notes: Turkey has experienced the biggest drop in the value of nation brand due to its devalued lira.

19
As a global power, American military has sufficient capacity to defend America from terrorism attacks
both at home and internationally. The US military is designed to; 1) first and foremost, defend the
United States of America and its territories from possible attacks; 2) defend lives of Americans at
home and abroad from terrorist attacks; 3) defend own interests as well as those of its allies; 4)
defend the US constitution and threats to the world peace; 5) prevent destabilization. The U.S. has
often used military power including non-military agencies (i.e. CIA and FBI) to invade and occupy,
free people in undemocratic systems, overthrow governments (i.e. even democratically elected), and
interfere in foreign elections. As the Cold War ended, the U.S. once again used its military might to
defend oil interests (i.e. 1990-91 Gulf War); moreover, the September 11 terrorist attacks in 2001
and the subsequent US invasions of Afghanistan and Iraq proved American imperialism. As a result,
8.583 lives perished; 4,491 in Iraq, 2,372 in Afghanistan, and 1,720 civilian contractor fatalities (for
further details, see Axinn et al. (2012); Johnson (2008); Daponte (2007); Marker (2008); Gray (2007);
Daalder (2007); Byman & Waxman (2002); Pauly & Lansford (2005); Carter & Perry (1999)).44

Military strengths and weaknesses are set out in Table 6; although the United States has three times
more aircrafts than Russia, the number of its combat tanks however is slightly more than one-fourth
of Russia, 5,884 and 20,216 respectively. In terms of aircraft carriers, the U.S. is undisputedly winner
in this category, 19 aircraft carriers compared to 17 from 24 countries combined. Since WWI, the U.S.
navy has been patrolling waters and shores in many parts of the world, nonetheless North Korea and
China have massive investments in naval assets; 967 and 714 respectively (number 2 and 3 after the
U.S.). The dominance of the US military is maintained through an unprecedented military spending
budget45 ($588bn in 2017) which amounts to 84% of the aggregate $699 billion from 24 countries.
The military budgets of Egypt, Vietnam, and Thailand individually is less than 1% of the U.S. military
spending. Strikingly, the U.S. military spends 13 times more than Russian military. Each of the major
European powers’ military spending on average was $38.4 billion; Germany ($39.2bn) spent more
than average on its military, but United Kingdom’s $45.7bn was the highest among them; France and
Italy had lower than the average spending on defense, $35bn and $34bn respectively. The military of
Canada ranks the lowest among the world’s top 20 military powers (Cebrowski & Barrett (2003);
Wiegley (1973); Priest (2004); Marshall (2014); Mearsheimer (2001)).

44 The US and coalition deaths by country: USA (4,491), UK (179), Italy (33), Poland (23), Ukraine (18), Bulgaria (13), Spain
(11), Denmark (7), El Salvador (5), George (5), Slovakia (4), Latvia (3), Romania (3), Australia (2), Estonia (2), Thailand
(2), Netherlands (2), Azerbaijan (1), Czech Republic (1), Fiji (1), Hungary (1), Kazakhstan (1), South Korea (1). The total
of deaths is 5,008, https://en.wikipedia.org/wiki/Casualties_of_the_Iraq_War (retrieved on February 25, 2019).
45 Credit Suisse Report (2018) shows the US military spending as $601 billion; Russia with $84.5 billion is second in the list.

20
Table 6: Military Strength Ranking (2017)a

Credit Suisse Report (2018)b

World Power Country Military Total Fighter Combat Naval Budget World Budget
Country Country
Rank Rating Population Personnel Aircraft Aircraft Tanks Assets* $billion Rank $billion
United States 1 0.0857 323,995,528 2,363,675 13,762 2,296 5,884 415 587.8 United States 1 601.0
Russia 2 0.0929 142,355,415 3,371,027 3,794 806 20,216 352 44.6 Russia 2 84.5
China 3 0.0945 1,373,541,278 3,712,500 2,955 1,271 6,457 714 161.7 China 3 216
India 4 0.1593 1,266,883,598 4,207,250 2,102 676 4,426 295 51.0 Japan 4 41.6
France 5 0.1914 66,836,154 387,635 1,305 296 406 118 35.0 India 5 50.0
United Kingdom 6 0.2131 64,430,428 232,675 856 88 249 76 45.7 France 6 62,3
Japan 7 0.2137 126,702,133 311,875 1,594 288 700 131 43.8 South Korea 7 62.3
Turkey 8 0.2491 80,274,604 743,415 1,018 207 2,445 194 8.2 Italy 8 34.0
Germany 9 0.2609 80,722,792 210,000 698 92 543 81 39.2 United Kingdom 9 60.5
Egypt 10 0.2676 94,666,993 1,329,250 1,132 337 4,110 319 4.4 Turkey 10 18.2
Italy 11 0.2694 62,007,540 267,500 822 79 200 143 34.0 Pakistan 11 7.0
South Korea 12 0.2741 50,924,172 5,829,750 1,477 406 2,654 166 43.8 Egypt 12 4.4
Pakistan 13 0.3287 201,995,540 919,000 951 301 2,924 197 7.0 Taiwan 13 10.7
Indonesia 14 0.3347 258,316,051 975,950 441 39 418 221 6.9 Israel 14 17.0
Israel 15 0.3476 8,174,527 718,250 652 243 2,620 65 15.5 Australia 15 26.1
Vietnam 16 0.3587 95,261,021 5,488,500 278 76 1,545 65 3.4 Thailand 16 5.4
Brazil 17 0.3654 205,823,665 1,987,000 697 43 469 110 24.5 Poland 17 9.4
Taiwan 18 0.3765 23,464,787 1,932,500 850 286 2,005 87 10.7 Germany 18 40.2
Poland 19 0.3831 38,523,261 184,650 465 99 1,065 83 9.4 Indonesia 19 6.9
Thailand 20 0.3892 68,200,824 627,425 555 76 737 81 5.4 Canada 20 15.7
Iran 21 0.3933 82,801,633 934,000 477 137 1,616 398 6.3 ---- ---- ----
Australia 22 0.4072 22,992,654 81,000 465 78 59 47 24.1 ---- ---- ----
North Korea 23 0.4218 25,115,311 6,445,000 944 458 5,025 967 7.5 ---- ---- ----
Saudi Arabia 24 0.4302 28,160,273 256,000 790 177 1,142 55 56.7 ---- ---- ----
Algeria 25 0.4366 40,263,711 792,350 502 89 2,405 85 10.6 ---- ---- ----
Source: https://www.businessinsider.com/most-powerful-militaries-in-the-world-ranked-2018-2 (retrieved on February 23, 2019).
Notes: a Global Firepower’s ranking pays particular attention to the manpower; b The Credit Suisse Report calculates the military strength based on the following weights of
total score: active personnel (5%), tanks (10%), attack helicopters (15%), aircraft (20%), aircraft carriers (25%), and submarines (25%).
* Number of aircraft carriers out of total naval assets; United States (19), Russia (1), China (1), India (3), France (4), United Kingdom (2), Japan (4), Egypt (2).

The United States has more aircraft carriers than all top 24 countries combined; 19 compared to 17. Also the military spending of the 24 countries in the aggregate is $699
billion whereas the United States’ military budget alone is almost $588 billion which amounts to 84% of $699 billion.

21
The United States is leader in innovation in North America and ranks highly on scientific research46
(Figure 5), all of which contributes to American imperialism, U.S. military dominance, and the dollar’s
hegemonic status. Moreover, the U.S. has far more top-ranked universities than any country in the
world, ranks 1st in the US News & World Report47, 181 of the 750 best global universities are located
in the U.S. Here are the top nine countries; (2. China (57), 3. UK (55), 4. Germany (50), Italy (38), 6.
France (30), 7. Canada (26), 8. Australia (26), 9. Spain (25), and 10. Japan (24). Another study (2019)
by the US News & World Report describes the U.S. most culturally influential (Hollywood, Coca Cola,
etc.) and ranks it as the “world's most dominant economic and military power."48 No surprisingly,
with 126 the world’s largest companies by revenue (54 of those are in the top 100, compared with
China’s 22) the U.S. once again maintains the top position in the Fortune Global 500 list (fiscal year
ended on or before March 31, 2018). Although the U.S. still dominates every measurable area of the
economy and military, its 55 out of top 100 companies (2017) dropped to 54 in 2018, nevertheless
the top four U.S. companies remained unchanged (Apple, Alphabet, Microsoft, and Amazon).49

In the top ten digital competitive countries50 ranking (Table 7), the U.S. has moved two spots up (3rd
in 2017) to rank 1st in the overall ranking in 2018, this was mainly attributable to improvements in
knowledge (4th from 5th) and in technology (3rd from 6th) with its future readiness ranking remains
unchanged (2nd). Despite its top position in the overall ranking, the U.S. ranks relatively low in some
sub-factors and lags behind Singapore and Sweden which rank high in most categories. On the job or
in classroom staff training, innovation, scientific and technical research greatly improve knowledge,
technology and future readiness. However, it is a concern for future of the United States that it ranks
rather low in a number of sub-factors; as such, international experience (22nd), starting a business
(27th), employee job training (34th), educational assessment (37th), graduates in sciences (53rd),
immigration laws (54th), attitudes toward globalization (37th) and cyber security (35th). Singapore
ranks 1st in educational assessment and graduates in sciences, but 58th in immigration laws.

46 Having the world’s best universities and companies, the United States continues to attract best people from around the
world. People with high qualifications and critical skill sets.
47 The 10 countries with the most top-ranked universities; https://www.businessinsider.com/countries-with-most-top-

ranked-universities-2015-10 (accessed March 4, 2019).

48 Here are other 24 countries; 2. Russia, 3. China, 4. Germany, 5. United Kingdom, 6. France, 7. Japan, 8. Israel, 9. Saudi

Arabia, 10. South Korea, 11. United Arab Emirates, 12. Canada, 13. Iran, 14. Switzerland, 15. Australia, 16. Turkey, 17.
India, 18. Italy, 19. Iraq, 20. Singapore, 21. Sweden, 22. Pakistan, 23. Spain, 24. Qatar, 25. Belgium;
https://www.businessinsider.com/most-powerful-countries-ranked-us-news-and-world-report-2019-2#6-france-20
(accessed March 4, 2019).
49 The top 10 countries with the most Global 500 companies are; the US (126), China (120), Japan (52), Germany (32), France

(28), UK (21), South Korea (16), Netherlands (15), Switzerland (14) and Canada (12). https://www.gfmag.com/global-
data/economic-data/largest-companies (accessed March 4, 2019).
50 The IMD World Digital Competitiveness Ranking (2018); https://www.imd.org/wcc/world-competitiveness-center-

rankings/world-digital-competitiveness-rankings-2018/ (accessed March 4, 2019).

22
 A. Researchers (2015 or later), millions B. R&D Expenditures (2016 or later), millions

C. Patents by Origin, millions D. Scientific Publications (2017), thousands

E. Global Leaders in Innovation in 2018

Source: The Global Innovation Index 2018

Figure 5: The Global Innovation Index 2018
23
Table 7: World Digital Competitiveness Ranking 2018
Country Overall Ranking Knowledge Technology Future Readiness
2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018
USA 2 2 3 1 6 4 5 4 6 5 6 3 3 1 2 2
Singapore 1 1 1 2 1 1 1 1 1 1 1 1 5 4 6 15
Sweden 5 3 2 3 2 2 2 7 9 4 5 5 9 8 5 5
Denmark 8 8 5 4 9 8 8 8 13 12 10 10 6 6 1 1
Switzerland 7 7 8 5 5 3 4 6 11 9 8 9 10 10 13 10
Norway 11 9 10 6 17 17 15 16 3 3 2 2 14 13 12 6
Finland 3 6 4 7 7 9 9 9 7 7 4 4 4 5 4 8
Canada 4 5 8 8 3 7 3 3 17 14 13 12 2 3 8 9
Netherlands 6 4 6 9 14 13 11 12 15 10 9 8 1 2 3 4
UK 12 12 11 10 12 12 10 10 18 18 16 13 11 11 9 3
Hong Kong SAR 14 11 7 11 8 6 6 5 5 2 3 6 25 27 17 24
Israel 10 13 13 12 4 5 7 2 22 24 27 25 7 9 11 7
Australia 9 14 15 13 11 16 18 15 12 15 15 14 8 7 14 11
Korea Rep. 18 17 19 14 13 15 14 11 16 13 17 17 24 25 24 17
Austria 26 19 16 15 16 12 12 13 29 28 28 26 19 19 15 14
Taiwan 15 16 12 16 19 19 16 19 4 8 7 11 20 22 16 22
UAE 22 25 18 17 38 35 38 36 10 20 14 7 18 17 7 12
Germany 17 15 17 18 10 10 13 14 25 25 21 21 13 14 18 20
New Zealand 13 10 14 19 15 14 20 21 8 6 11 16 16 15 20 18
Ireland 25 20 21 20 26 25 25 22 27 27 25 29 12 12 10 13
Iceland 24 26 23 21 33 32 30 28 20 22 20 18 17 18 21 19
Japan 23 23 27 22 24 23 29 18 21 19 23 23 22 23 25 25
Belgium 19 18 22 23 21 20 22 25 24 21 24 24 15 16 22 23
Luxembourg 16 21 20 24 23 29 27 32 2 11 12 15 23 24 23 21
Estonia 27 27 26 25 30 30 28 29 19 17 19 20 26 26 26 26
France 20 22 25 26 20 21 19 20 23 23 22 19 21 20 28 27
Malaysia 21 24 24 27 25 22 17 17 14 16 18 22 27 28 27 29
Qatar 32 28 28 28 39 37 35 37 38 31 31 27 28 21 19 16
Lithuania 28 29 29 29 18 18 21 23 28 29 29 30 34 33 31 33
China Mainland 33 35 31 30 22 24 23 30 37 39 36 34 39 38 34 28
Spain 30 30 30 31 35 36 33 31 35 32 33 33 29 30 29 30
Portugal 29 31 33 32 29 31 31 27 30 35 37 36 31 31 35 32
Czech Republic 31 32 32 33 36 34 36 38 26 26 26 31 33 34 37 34
Slovenia 39 36 34 34 28 26 26 26 43 40 40 38 41 35 36 35
Latvia 34 33 35 35 32 33 34 34 32 33 32 32 37 39 41 39
Poland 38 38 37 36 31 27 32 33 36 36 39 37 49 51 39 37
Chile 37 37 40 37 53 51 52 47 31 34 34 35 32 32 33 31
Kazakhstan 35 43 38 38 41 47 40 35 34 43 35 39 35 41 38 40
Thailand 42 39 41 39 48 42 44 44 33 30 30 28 50 48 45 49
Russia 41 40 42 40 27 28 24 24 44 47 44 43 55 53 52 51
Source: IMD World Digital Competitiveness Ranking 2018

24
3.0 Concluding Remarks

The U.S. endeavor in becoming the world’s most dominant nation is easier said than done. Provided
that it began its existence in the new world as a colony of European powers (i.e. Spanish, French, and
British), imperialism was in America’s DNA even before birth as a new nation in 1776. As European
settlers arrived in the North American continent, at times killing was perceived as a natural way to
gain land as they moved westward (i.e. Indian massacre), right then the seeds of an imperial nation
were planted. In that regard, since the late 19th century the U.S. has been not only repeatedly accused
but also advocated by some of its Presidents (i.e. Thomas Jefferson) of being hegemony, contemporary
imperialism or American imperialism. White settlers moving from east to westward meant removal
of Indians and Mexicans via occupation, annexation, and wars. The federal government of Washington
whenever possible purchased land from Native Americans through treaties with tribal leaders.

American Revolution War (1775-83) was the defining moment in US history. While the Revolutionary
war was in full swing, the Continental Congress authorized the issuance of Continental paper notes in
1775 to finance the war, and declared its independence from the Great Britain on July 4, 1776. This
marked an era during which feudalism left its place to capitalism which was fueled by the Industrial
Revolution in the 18th and 19th centuries. After the taste of imperialism, the Monroe Doctrine of 1821
and the “manifest destiny” led to territorial expansion (1812-1860) and American exceptionalism,
which played an important role in the annexation of Oregon, Washington, and Texas. The Mexican-
American War of 1846 and resultant Treaty of Guadalupe Hidalgo gave California and New Mexico to
the United States; other claimed territories included Utah, Nevada, Arizona, Wyoming, and Colorado.

The U.S. wanted to keep European colonial powers away from the Americas. Accordingly, it ended its
isolationist non-intervention policy and annexation became a tradition with the Spanish-American
War of 1898 that ended Spanish colonial rule in Americas and resulted in the U.S. acquisition of new
territories in western Pacific and Latin America such as Puerto Rico, Philippines, and Guam. The U.S.
expansionism craved more, winning insular possessions in the Caribbean and Hawaii played a role in
its interest of intervention in Europe. Even before the conclusion of WWII, the United States assumed
the role of creating a new world order at the 1944 Bretton Woods Conference, in its leadership allies
agreed to establish IMF, World Bank, and BIS to prevent another Great Depression. In the post-WWII,
in order to preserve world peace by ways of deterrence of Russia’s threat, non-wartime alliances
established the United Nations and the North Atlantic Treaty Organization. Following the failure of
the Bretton Woods system of fixed exchange rates and the collapse of Soviet Union, the U.S. emerged
from the Cold War as unrivaled without counterbalancing or restraining international power.

25
International free trade became a central focus in the late 20th century; as a result, EU lifted barriers
domestically (1992); the North American Free Trade Agreement (NAFTA) took effect on January 1,
1994; the GATT became the World Trade Organization (WTO) in 1994; and the Economic Community
(EC) became the Economic and Monetary Union (EMU). All of these developments were perceived as
positive until the outbreak of the homegrown Asian crisis of 1997-98, the last systemic crises of the
20th century that cost investors globally a jaw-dropping over half a trillion dollars. Maybe this was a
warning of what was yet to come; exactly a decade later, the far-fetched implications of the GFC as the
first systemic crisis of the 21st century cost the world’s economies trillions, jolted societies from their
roots, dislocated banking systems, and displaced millions of people. Consequently, the worst crisis in
human history forced between 0.5% and 1.0% of the world population to slip into poverty.

Banking panics, unresolved global imbalances, excessive risk-taking by international banks, distorted
incentives, accommodative monetary policies (i.e. savings glut or dollar glut), and the propagation of
systemic banking crises mostly triggered by too-big-to-fail financial institutions and the consequent
financial dismay left behind were a compelling reason behind the emergence of cryptocurrencies in
the aftermath of the GFC (particularly, the first successful cryptocurrency Bitcoin). Advocates believe
that Bitcoin will dominate as a medium of exchange online, end the dollar’s hegemony, and become a
global reserve currency. At the backdrop of increasing financial turmoil along with the United States’
abuse of sanction power since the GFC of 2008, the interest in search for a viable alternative to the
U.S. dollar has reemerged. Modern gold rush, referring to the gold accumulated by China, Russia, and
Turkey (to a degree) since 2013, could be seen as part of a masterplan to end the dollar’s hegemony
by moving away from international trade denominated in US dollars.

How much longer can the US dollar keep its “kingpin” currency status? According to economist Jim
O'Neill, not very long. The quick rise of Chinese economy and constant threat of Russia will challenge
the dollar dominance, and maybe the latest theatrical trade war between the United States and China
is the best or only response the U.S. was able to come up with. Numerous recent developments point
to the direction of dwindling dollar's influence as the world’s dominant reserve currency; as such,
Russia has repeatedly called for the use of gold or national currency in international trade; euro will
be used increasingly more between China and Germany as its number one trade partner; China and
Russia prefer not to use US dollar in oil contracts; furthermore, they extended yuan-ruble swap deal
worth $25 billion for another three-year period. The future looks bleak as we all are surrounded by
too much uncertainty in the midst of geopolitical chaos, wars and ever more financial turmoil. It is so
unfortunate that the leaders of major powers (President Trump in particular) are less willing to take
much needed actions to end the wretchedness that the world is currently suffering.
26
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