Dollar’s Diktat Will Prove Its Downfall Once Emerging Powers Unite

The US accounts for over a third of the skyrocketing $100 trillion in global public debt, with the country's $35.75 trillion in borrowing (and climbing) gradually putting the economic behemoth in jeopardy as its share of global GDP by PPP sinks to below 15% - its lowest showing since the Great Depression of the 1930s, and down from a historic high of as much as 50% (in nominal terms) in the mid-1940s and the creation of the Bretton Woods System of international exchange.

“Countries are seeking ways and means of conducting trade and business outside the US-dominated financial architecture, because they are fed up with the US dictating terms to multiple countries, especially by preventing countries from doing business with countries under US sanctions,” Chintamani Mahapatra, founder and chairman of the Kalinga Institute of Indo-Pacific Studies, told Sputnik, commenting on the US's relative decline against the backdrop of this week's IMF/World Bank Group meetings.

There is essentially no other option for many countries at the moment “to conduct business with countries under US sanctions, even if they do not support US sanctions,” Mahapatra stressed, pointing out that the rising Chinese yuan has a way to go before it can “emerge as a credible international currency,” and that US-led institutions like the IMF, World Bank and WTO will be certain to do their best to “ensure that the US and its allies maintain their dominance in the global financial ecosystem.”

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“The combined West will try not to allow an alternative system from rising. And the non-West is hardly united. Countries have complex interdependence,” the observer said. “Thus, one cannot write the obituary of the dollar-dominated system at the moment. Other economies have to improve to a point where the relative US domination declines further, and in that case the alternative system will easily emerge.”

“The first step should be to attempt to create an alternative financial system for global trade, so that the payment system can be other than the current financial architecture dominated by the United States. However, de-dollarization is not easy. The emerging economies will have to resolve their bilateral political and security differences before seeking to create a de-dollarized order based on non-discrimination, equity and justness,” Mahapatra emphasized.

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For now, “the US, and not many other countries, are benefiting a great deal from the current war in Europe and the West Asian region. Thus, expecting other economies to perform better now is not appropriate,” Mahapatra added.

As far as the IMF/World Bank agenda's focus on debt is concerned, the observer stressed that so long as the dollar's hegemony is maintained, growing debt in the US will create major risks for the global economy.

"Although the US, the largest global economy, is facing huge public debt, the US economy is unlikely to suffer much. After all, the US Federal Reserve prints dollars and not any other country. But decline or turbulence in the US economy due to huge and unsustainable debt will have global ramifications and thus countries are trying to avoid shocks as a natural reaction," Mahapatra said.

"The global economy will turn turbulent, if the US economy falters. [This] is partly because of the dominance of the US dollar in global trade and transactions. The financial system of the globe is controlled by the US due to the power and influence of its currency. International trade is not possible without countries entering the US controlled financial system and it is best reflected in US sanctions that prevent other countries from conducting transactions. There are limits of currency swaps and barter trade in the contemporary global economic ecosystem," Mahapatra explained.

That said, Russia's experiences since 2014, and particularly after 2022 and the leveling of over 20,000 sanctions against the country by the West, have demonstrated that at least larger countries have the ability, and the means, to break through the dollar-based blockade of trade. At this week's BRICS Summit in Kazan, Russia will seek to show its partners systematized ways to increase trade in national currencies, and strengthen the banking networks to enable them.

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Dollar’s Diktat Will Prove Its Downfall Once Emerging Powers Unite – Analyst