The US Dollar's dominance as the world's primary reserve currency is under scrutiny, with Rabobank strategist Michael Every offering a thought-provoking perspective. Every engages with the work of historian Adam Tooze, who argues that the USD has evolved into a "profit dollar," supported by the rising value of US assets. This shift, however, raises complex questions about the relationship between financialization and production, and the role of the dollar in the global economy.
The Profit Dollar and the Hamiltonian Framework
One of the key points Every highlights is the challenge of dismissing dollar holdings based solely on the appreciation of US assets. Without a robust alternative framework, such as a Hamiltonian neomercantilist approach, critics risk falling into a trap of realpolitik. This framework, named after Alexander Hamilton, emphasizes the strategic use of economic policies to protect and promote national interests. Every suggests that many critics of the US, including those advocating for a more balanced approach between financialization and production, might find this framework appealing.
The Shift in Economic Statecraft
The recent op-ed in the New York Times by Mohamed El-Erian further underscores the changing dynamics of economic statecraft. El-Erian references the Bessent Doctrine, which emphasizes the primacy of national security, domestic politics, and geopolitics over traditional business interests. This shift implies that the days of the "profit dollar" might be more about safeguarding national interests than solely maximizing financial gains.
The Fed's Role and the Warsh Doctrine
The upcoming release of the Federal Reserve's minutes is expected to provide further insights into the central bank's thinking. With the Warsh Doctrine in mind, which suggests a more cautious and measured approach, the minutes might reveal a more nuanced stance on monetary policy. This could indicate a subtle shift in the Fed's strategy, potentially aligning with the broader trend of prioritizing economic statecraft over traditional business interests.
Conclusion: The Evolving Role of the Dollar
The debate surrounding the US Dollar's reserve status is far from settled. Every's analysis highlights the complexity of the situation, where the "profit dollar" concept challenges traditional notions of reserve currency. As the global economy continues to evolve, the interplay between financialization, production, and national interests will likely shape the future of the dollar's role. This evolution raises important questions about the balance between economic efficiency and strategic national policies, and the potential for a more diverse global currency system.
