Dollar primacy and American power: What's at stake?

Achilles’ deal: Dollar decline and US grand strategy after the crisis

“…Dollar hegemony also means a reduction in exchange rate risks for US multinationals, a range of advantages for American financial institutions in dollarized global financial markets, and the capacity to deflect current account adjustments onto other countries. A reversal of these privileges would not only see far greater international scrutiny of US policy choices, but could also severely curtail the US' capacity to project military power internationally (Kirshner, 2008). Dollar hegemony, particularly in the context of the US' trillion-dollar budget deficit, is thus a very important precondition for US global security commitments and the distribution of power within the international system: the 'dollar's reserve currency role is central to America's geopolitical preeminence and if it loses that status US hegemony will be literally unaffordable' (Layne, 2012b: 418).…”

The geopolitics of Brazilian soybeans

“…Even beyond the direct profits made by US-based transnational trading companies from controlling Brazilian soybean exports to China, therefore, the US government and US-based corporate and consumer interests benefit enormously from the maintenance of the US dollar as the default currency for the international soybean trade -especially now that Brazil has surpassed the US as the largest soybean exporter in the world. This bears striking resemblance to the political power and economic rents the US extracts from 'petro-dollars' that flow from oil exporting states through Wall Street, a process that gained much attention during the 1970s when the US ceased being the world's leading petroleum exporter but maintained economic profits and geopolitical control over the oil flow by issuing the international reserve currency and assuring that Middle Eastern oil would be sold in US dollars (Magdoff and Sweezy 1981;Kirshner 2008;Spiro 1999). We might ask, therefore, how agroindustrial commodity production and trade might serve geopolitical functions (and thus contestation) similar to those that 'petro-dollars' are known to have served since the 1970s.…”

“…These transfers of wealth operate far beyond the particular sectors engaged in international trade, affecting the operations of all companies and the basic cost of living for people in all but the most protectionist countries. Yet these effects are contradictory across classes, as local currency devaluation and interest rate hikes sustain competitive exports but also slash real wages and (especially when combined with tax increases and cuts in welfare spending) in effect transfer wealth from workers to domestic and transnational elites, especially financial and corporate elites in the United States operating through US-dollar-dominated commodity markets (Cohen 1998;Kirshner 2008;Spiro 1999).…”

“…(Leahy 2013) As long as the Chinese yuan is not a floating currency and the volume of soybeans flowing through the boards of trade in Brazil or China remains significantly lower than the CBOT, these swap agreements are merely preventive measures in case another financial crisis in the global North freezes US dollar markets, as in late 2008. But over the long term, as more trade and investments take place between Brazil, China and other countries in the global South, such agreements may indeed enable these states to pursue more independent politico-economic policies that challenge more directly the hegemony of the US dollar and the US government in the inter-state system (Kirshner 2008;Spiro 1999). For example, Russian prohibition on agricultural imports from the US, EU, Canada, Australia and Norway were enthusiastically welcomed by Brazilian (and Latin American) state and agribusiness interests.…”

Sectoral Interests and Global Money: Renminbi, Dollars and the Domestic Foundations of International Currency Policy

“…If China's support of the dollar is linked to US promises to maintain an open market for its imports, US labor and manufacturing interests opposed to free trade with China may have a further reason to oppose the dollar's international role. For most of the postwar period, the dollar's global preeminence has reinforced US foreign policy goals (Kirshner 2008). But if the dollar's international role suddenly becomes more of a foreign policy burdensomething that US military, trade and aid policies must be mobilized to defend-it is unclear how much support US sectoral groups would be willing to lend it.…”