Si vis pacem, para bellum - The WASHINGTON’S way
The global supremacy of the U.S. dollar did not emerge by chance or peaceful consensus. It was forged in the aftermath of three pivotal victories: 1918, 1945, and 1990. Each vanquished old orders and cleared the stage for a new empire to rewrite the rules on its terms. With traditional powers on their knees, the United States seized the opportunity to anchor the world’s commerce to its own currency. As war-torn continents scrambled for credit and reconstruction, the dollar stepped in as a pillar of stability and order. Gone were the days of multiple competing currencies vying for dominance. Now there was one linchpin, one financial standard: the greenback. The U.S. had not merely won wars; it had inherited the right to dictate the terms of trade and credit worldwide.
When the dust settled after each major conflict, it was the U.S. economy that stood unscathed and flush with gold reserves. As European and Asian powers bled out, Washington piled up capital and reengineered financial architectures to its liking. The Bretton Woods agreement did not just stabilize currencies; it placed the dollar at the heart of a system that forced everyone else to play by American rules. Later, the collapse of the Soviet Union assured there would be no large-scale rival offering a different brand of global finance. This left the U.S. in control of the clearinghouses, pipelines, and codes that keep the world’s markets ticking. Without a humiliating defeat to fracture faith in American leadership, no one has been able to unseat the dollar as the default unit of account and store of value.
Past empires understood that controlling trade routes and monetary flows often mattered more than winning pitched battles. The Persian Empire’s coinage circulated across continents, but when it fell, its currency fell with it. The British pound once reigned supreme, but two brutal world wars drained Britain’s finances and ended its global monetary supremacy. The United States never suffered such a fate. It did not simply rely on passive advantage or polite negotiation. When push came to shove, it was ready to use raw force to safeguard its interests. Aircraft carriers and bombers are still on call to remind any upstart that global finance has a military backbone. While this might seem crude, it is the naked reality: The empire does not hesitate to show its teeth when its economic order is at stake.
The United States operates 750 military bases in over 80 countries, providing unmatched capability to project raw force anywhere in the world. These bases keep its allies safe (and belittled) while instilling fear at its opponents, pure pressure here, ideology does not matter at all.
Pecunia nervus belli
From a Modern Monetary Theory (MMT) perspective, the U.S. occupies a singular position in the international monetary ecosystem. As the issuer of a free-floating, non-convertible fiat currency that happens to be the world’s primary reserve currency, it can sustain fiscal deficits without the usual constraints. Traditional notions of crowding out and exchange rate risk do not bite as hard when everyone else demands your currency. MMT underscores that a sovereign currency issuer can create money ex nihilo to fund domestic priorities, provided there are idle real resources. When these resources are global, and trust in the dollar is immense, the U.S. can finance a permanent military presence abroad, enforce sanctions at will, and fund periodic bailouts, all without triggering runs on the currency. This capability underpins what economists call the exorbitant privilege, a condition where the U.S. can borrow cheaply in its own currency, pay back debts by issuing more of it, and rely on the world’s hunger for a safe store of value.
He who pays the piper calls the tune
The global financial system that runs on dollars funnels wealth into U.S. markets. Central banks around the planet stockpile American Treasuries as reserves, effectively lending to Washington at negligible rates. Commodity markets from oil to metals are priced in dollars, compelling every nation that needs them to interact with U.S. institutions. Even in times of crisis, when rational logic might suggest diversification, investors stampede toward the dollar as a safe haven. This arrangement allows the U.S. to project military and economic power without exhausting itself. Other countries might buckle under chronic deficits or overextended commitments, but the U.S. does not, because the world continuously subsidizes its empire through demand for its currency.
“The privilege of issuing the international currency enables the United States to finance its deficits easily, but it also imposes responsibilities for maintaining global stability.”
The empire does not just rely on interest rate differentials or clever financial engineering. Its arsenal includes the ultimate punishment: exclusion from the dollar network. To be cut off from dollar clearing systems is, for many countries, economic suffocation. Without access to the currency that lubricates global trade, a state finds itself locked out of most markets and financial corridors. Diplomatic bargaining becomes lopsided when one side controls not only battleships but also the keystrokes that decide who gets to buy and sell critical goods. While some nations grumble, testing small-scale local currency arrangements or digital tokens, they soon discover that no real alternative offers the scale, liquidity, or political cover the dollar provides.
Rivals to U.S. monetary supremacy remain aspirational. China, after decades of rapid growth, has hit structural hurdles. Its financial opacity, demographic challenges, and strategic encirclement by U.S.-aligned states limit the yuan’s appeal as a genuine alternative. India, though it aspires to greatness, still has a long road ahead before it can project monetary influence. The Eurozone is too fragmented and politically precarious to rival the dollar’s gravitational pull. Meanwhile, every crisis, from wars in the Middle East to financial panics in emerging markets, pushes global capital back into American bonds. Stability begets loyalty, and loyalty cements the dollar’s status as the go-to currency for trade and investment.
“Economic tools, including currency manipulation and sanctions, function as critical instruments of U.S. hegemony in a world defined by power competition.”
Should the United States ever face a catastrophic defeat, one that cracks its aura of invincibility and shatters trust in its currency, the edifice might crumble. History is clear that when empires fall, their currencies usually fail with them. But absent such a disaster, the U.S. can deploy raw force, impose sanctions with the click of a button, and float gigantic deficits, knowing the world has nowhere else to go. Each time nations consider challenging this order, they flinch at the cost. Without mass defection, the dollar’s reign continues, less a friendly partnership of equals and more an empire’s dictate masked by the veneer of financial normalcy.
Digital currencies and smaller regional blocs dabble in alternative systems, but for now, the empire prevails. The trust accumulated over a century of relative stability, combined with unparalleled military might, keeps the dollar on top. In a world where the U.S. can wield both spreadsheets and warheads, no competitor has found a safe opening to undermine the greenback’s throne. The empire stands, the currency reigns, at least for the years to come.
