Will the 'Dollar Wars' Kill What's Left of the American Dream?

By Scott Thill, AlterNet. Posted June 26, 2009.

"Right now, the SDR doesn't have that mechanism. But that can change over time. In the near term, this is a way towards diversification, because the dollar doesn't have a majority share in the SDR." 

Kunstler adds: "They're obviously hedging their bets as much as possible. Put yourself in their shoes. They see the U.S. financial system's stupendous swindles, and they know the score. So their interests are strictly tactical and strategic in the interests of their survival. They also surely want to try to insure the continuation of world trade, with or without the U.S. consumer." 

Which is why BRIC, and by extension the countries beneath its heel or shaking its hand, are diversifying their dollars and dumping cash into the IMF, where they can attempt to influence the international monetary system in their favor. The United States has so far committed $108 billion, including $5 billion siphoned from the controversial war-funding bill that passed in mid-June.

In addition, it has arranged for the IMF to receive over $500 billion altogether, mostly to prop up zombie European banks that drank too much of the derivatives Kool-Aid. So BRIC has an uphill battle ahead of it. But it's gaining strength, and wants to convert that to IMF say-so. 

"They want more significant voting rights in the IMF," Ziemba said. "The money is in exchange for leverage. China has talked in detail about how the over-reliance on the dollar was adding to global instability, creating a situation where the optimal monetary policy for the U.S. is not optimal for countries tacked to the dollar. But it's fairly obvious that, in five to 10 years, the role of these countries in the global economy will only increase. But they also have to figure out how much responsibility they want to take on." 

Or can take on. BRIC is ascendant for sure, but it's about to inherit a global economy and environment that is nothing like the respectively stable climates American and European empires have enjoyed over the last few hundred years. From the econopocalypse to climate crisis and beyond, BRIC is quickly going to find its hands full of problems that will doubtlessly dampen its upward surge. Sure, the dollar is toast, but so is Earth's biodiversity and store of natural resources. It's hard to build a superpower on that heap.  

"I think all nations are losing the ability to control events at the global level," Kunstler concluded. "It's a symptom of the crack-up of globalization, per se: A set of transient economic relations that only existed because of special conditions, namely, the final blowout of the cheap energy era. With that over, it's now a mad scramble for each player to survive.

"Observers seem to think that China will become the new global hegemon, but I doubt it. They have problems with water, food, overpopulation and environmental degradation that are much worse than ours. The world is comprehensively headed for a reduced standard of living."

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Scott Thill runs the online mag Morphizm. His writing has appeared on Salon, XLR8R, All Music Guide, Wired and others.

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