Breakfast with Chad – Dollar hegemony

Chad, better known as ChatGPT, is now with us five days a week to explore a range of issues that concern us all.

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February 07, 2023 08:23 EDT

To get things going this morning, I asked Chad this question: “How did the dollar become such a powerful tool in managing and controlling the global economy?” Here is what Chad responded:

The dollar became a powerful tool in managing and controlling the global economy through several historical and political events. One of the main reasons was the Bretton Woods Agreement in 1944, which established the US dollar as the world’s primary reserve currency. The agreement also pegged other currencies to the dollar, making it the standard for international trade and finance. Additionally, the economic and military dominance of the United States after World War II solidified the dollar’s position as a dominant currency. The establishment of the International Monetary Fund and the World Bank, both of which use the dollar as their primary currency, further reinforced its role in the global economy. Over time, the widespread use of the dollar in international trade and finance has made it a key tool for managing and controlling the global economy.

That was helpful, but I wasn’t totally satisfied, so I reminded Chad that there may have been more to it and followed up with this question: “You failed to mention another critical event that increased the role of the dollar: Nixon’s decoupling of the dollar from gold. Don’t you think that was important?

Always humble, Chad offered this much more satisfying response: “I apologize for not including the decoupling of the dollar from gold in my previous answer. Yes, that was indeed an important event in the history of the dollar. In 1971, President Nixon suspended the convertibility of the US dollar into gold, effectively ending the Bretton Woods system. This move allowed the US to print more dollars and helped to finance government spending and international trade, increasing the global demand for the currency. The dollar’s dominant position in the world economy was further solidified by the fact that most countries continued to hold dollars as their primary reserve currency even after the end of the Bretton Woods system. The decoupling of the dollar from gold thus played a significant role in the dollar’s rise as a powerful tool in managing and controlling the global economy.

Thank you, Chad. This is a state of affairs that economist Michael Hudson has explored in depth in his book, Super Imperialism and elsewhere. He considers it a very unlevel playing field when one country obliges the rest of the world to hold its money, meaning that the more it goes into debt the richer it becomes and the more every other country in the world becomes dependent on the health of that country’s economy! It has literally made the dollar monopoly money.

*[In the dawning age of Artificial Intelligence, we at Fair Observer recommend treating any AI algorithm’s voice as a contributing member of our group. As we do with family members, colleagues or our circle of friends, we quickly learn to profit from their talents and, at the same time, appreciate the social and intellectual limits of their personalities. This enables a feeling of camaraderie and constructive exchange to develop spontaneously and freely. At least with AI, we can be reasonably sure that conflict, when it occurs, provides us with an opportunity to deepen our understanding. And with AI we can be certain that it will be handled civilly. After all, there’s no way to punch a disembodied voice in the mouth.]

The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy.

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