The de-dollarisation of the world economy was a central theme of the Schiller Institute International Conference, held on April 15-16, 2023. While deals have already been struck among several nations to use their respective national currencies in bilateral trade and investments, deliberations are also ongoing on how to create a reserve currency that can replace the Dollar in international exchanges, in reaction to the weaponisation of the US currency (such as the seizure of the currency reserves of Russia and Afghanistan). As Strategic Alert Service has reported, this topic will be taken up at the next BRICS meeting in the summer. Over 30 countries have started to use the Yuan in bilateral exchanges with China.

In this context, Brazilian President Luiz Inácio Lula da Silva’s trip to China takes on added strategic importance. Banco Bocom BBM, a traditional Brazilian financial institution controlled by strong Chinese banks, became South America’s first participant in China’s Cross-Border Interbank Payment System (CIPS).

Although the Yuan overtook the Euro to become the second most important currency in Brazil’s international reserves (as per a Central Bank report at the end of 2022), the Dollar remains dominant, at 80.42% of the total.

In his keynote speech to the Schiller Institute conference, Dennis Small, Ibero-America Editor of Executive Intelligence Review (EIR), addressed the issue, warning that the US should also de-dollarise, by dumping the Wall Street Dollar, and any new reserve currency should be based on and supported by development of the physical economy.

The latter is the most difficult question for academics to understand, who tend to be captive of statistical-mathematical methods of determining value. Small referred to a key paper written by Lyndon Hermyle LaRouche Jr (September 8, 1922 – February 12, 2019), an American political activist who founded the LaRouche Movement and its main organisation, the National Caucus of Labour Committees (NCLC), in 2000. He had penned the paper, titled Trade without Currency – On a Basket of Hard Commodities, as an answer to then ongoing discussions on a new monetary system. LaRouche insisted that before discussing any currency parities, the entire IMF economic system should be replaced by a set of agreements for development projects. Only a development policy, and not gold or any currency basket for itself, can guarantee monetary stability, he stressed.

Referring to the 1945-65 Bretton Woods System, LaRouche explained what had constituted the strength of the US Dollar as a reserve currency, within the gold-reserve system, which worked, “because it was defended by protectionist and related regulatory measures, both internationally, and within the relevant nations themselves”. He added: “It was the physical strength of the US economy… measured in terms of rates of growth of physical productivity per capita and per square kilometre, a strength expressed as periods of high rate of increase in hard-commodity forms of capital formation, which was crucial for the way in which the US economy performed during the initial two decades of the post-war monetary system.”

LaRouche further said: “This physical strength, matched with war-torn Europe’s needs for both expanded volumes of US agricultural products and machine-tool categories, enabled US credit to stimulate a rate of growth of physical productivity, per capita, in western Europe, a growth from which Europe obtained the means to meet its obligations to the US.”

This article was first published in Strategic Alert Service on April 19, 2023. Read the original article

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Published by Koushik Das

Koushik Das (born on May 16, 1976 in Kolkata) is a career journalist. Based in the Indian capital of New Delhi, Koushik writes mainly about foreign policies and current geopolitical issues, and rarely about other topics. His own political ideas are highly influenced by Antonio Gramsci, Louis Althusser, Michel Foucault, Michael Oakeshott and others. English philosopher and political theorist Oakeshott (Dec 11, 1901-Dec 19, 1990) says that “in political activity, men sail a boundless and bottomless sea. There is neither harbour for shelter nor floor for anchorage, neither starting-place, nor appointed destination. But we have to keep afloat”. (Rationalism in Politics, 1962) As a student of Political Science, Koushik loves to share his views on issues, which have great impacts on his thought process (and also on India, South Asia and of course on the global community), with his readers through his website – Boundless Ocean of Politics. By doing so, he tries to keep himself afloat. You will find some of his articles in https://inserbia.info/today/ (https://inserbia.info/today/author/kou_das13_i/), as he has been trying to assess the global geopolitics since 2003. You can also mail him at kousdas@gmail.com View all posts by Koushik Das