“The Life Cycle of Internationally Supported Currencies: Is the US Dollar Facing Its End?”

From time to time, humanity takes a turn in its commercial organization and as a result of this, the way in which the productive chains and their value are related is also modified. The foregoing could translate into what some economists describe as the life cycle of internationally supported currencies. That is to say, in the past, it has happened with the ruble, the pound sterling and now with the dollar, that its value begins to dilute, or its viability as a universally accepted reserve currency is seriously questioned.

This cycle described above is not, rather, the result of a set of circumstantial and structural factors that together lead to a change in value and use of the currency that countries decide to take as a reference to support their economic transactions outside of its borders.

To further clarify this point, it is important to take into consideration that, since the end of the Second World War, the dollar has been considered a safe currency, being backed by a couple of elements: originally it was protected by gold, but the President Nixon canceled this type of pattern.

In this way, and without most people in the world knowing it, for the last 50 years, the US dollar has no longer been backed by any asset, although, if it has been, by force and power. US economy and the fact that oil has always been traded in dollars.

In other words, the paper that is printed in the US treasury reserve does not have a support that can give certainty to its value, and it is only the dynamism of the economy of the country of stars and stripes and the positive performance of its resources. energy sources, which sustain their value. If any of these sectors were to fall, as has been feared, for several months, the global economy would be in serious trouble. If that were to end, it would mean the end of the US dollar.

And it is that being the reserve currency worldwide, has been a true privilege that unfortunately the Americans have not interpreted adequately, they have even abused that privilege, with totally reckless monetary and fiscal policies for many years, especially , in recent times, which has really devalued the dollar and seriously endangered the future of the world economy.

In addition to these factors, the war between Russia and Ukraine, the post-pandemic stage in the world of the economy and the weakening of the US presence in many regions of the planet as the main reference to follow and compare in relation to technology, put into question the continuity of the supremacy of this country economically over China, its main challenger, is in serious trouble.

Due to all these circumstances, you have the enemies of the United States of America, led by China, forming a new economic bloc. The acronym, BRIC’S, refers to the group of countries formed by Brazil, Russia, India, China and South Africa. This bloc constitutes the group of countries considered the most advanced among the States with emerging economies.

If at the birth of this strategic alliance, we add that a few days ago, Saudi Arabia has indicated that it is open to considering other currencies to trade the oil they produce in those latitudes, the situation would not look good for the Americans, much less for its supremacist preeminence in the energy world.

If this were to happen, there would be a complete implosion of the global economic system, a fact that would tear apart each one of the productive chains in the world and, as a result, would generate exorbitant inflation, in a great variety of products and services throughout the world.

But the most important thing would be that the United States would lose the economic dominance and superpower status with which it has managed for more than half of the 20th century and the elapsed time of the 21st.

Why, the emerging economies led by the BRIC’S, have decided to join forces and carry out most of their commercial transactions outside the reach of the US dollar or the euro?

Because, by not using the US currency, this country would see its economic hegemony over any of the members of this block reduced, which would translate into a higher dynamism of commercial operations in energy, raw materials or services between these countries that, in addition They concentrate just over 40% of the world population. This last factor also ensures that its demand will continue to grow and will be active for a long time, which many areas of the planet, especially countries whose population is declining and aging, cannot guarantee.

Despite this threat, according to graphs provided by the IMF and the World Bank, since 1950, the US economy has presented high growth rates, almost always in a positive sense, which has led to an almost irrefutable false sense of security on the part of that country’s economists, which has led to confidence in its economic recovery that could be ephemeral and not very viable in the long term.

The teaching of this endless loop of economic cycles and changes in its direction is forceful, there is no economic and military superpower that will last forever, since there will always be an alternative force that will challenge its supremacy. The time for a new world order has arrived and with it, moments of uncertainty and economic paralysis could accompany it. However, it would not be correct to forget that times of crisis are also times of opportunity and the well-used geographical position of Mexico can play substantially in its favor.

BY LUIS MIGUEL MARTINEZ ANZURES
PRESIDENT OF INAP

LSN