The exploitation of the US dollar as the singular reserve currency of the world has reached unprecedented heights. The 2008 Lehman Brothers crisis thrust this issue into the spotlight. The US government, employing quantitative easing between 2008 and 2010, printed over $4 trillion to stimulate the economy and avert a recession. This marked the beginning of a series of quantitative easing measures, including QE4 initiated in March 2020, which has led to the creation of an estimated $8.5 trillion in money by July 2023. This aggressive monetary policy had far-reaching consequences, particularly impacting India.
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In the aftermath of the Lehman Brothers crisis, India suffered a series of negative repercussions. The nation witnessed a decline in its growth rate, a crash in its stock market, depreciation of its currency, and an expansion of its fiscal deficit. The crisis also triggered a significant surge in food inflation levels in India. From 9.1% in 2008-09, food inflation escalated to 15.6% in 2009-10, marking a staggering 72% increase. This inflation was primarily attributed to supply shocks, global commodity price hikes, domestic demand pressures, and the implementation of expansionary fiscal and monetary policies.
In essence, the fiscal policies of the United States have been supporting its own lifestyle at the expense of the rest of the world, particularly the resource-rich countries of the global south. The US dollar's dominance, dating back to the Bretton Woods system, was maintained through offshore balancing tactics inherited from British colonialists. This strategy involved utilizing regional powers to curb potentially adversarial nations, ultimately bolstering American global primacy.
This offshore balancing approach resulted in numerous global hotspots, facilitating the interests of the American war machine and supporting the supremacy of the US dollar. The use of fiat US dollars, often printed recklessly, has also been associated with funding regime change efforts and influencing political movements across the world. Moreover, the US has leveraged its single reserve currency status to freeze and seize assets of nations it deems hostile, displaying its ability to weaponize currency.
China, under Deng Xiaoping, initially embraced its role as the world's manufacturing hub. However, over time, it became clear that the US dollar's unchecked creation was detrimental to its interests. The US's massive production of fiat dollars, especially through quantitative easing, contrasted sharply with China's hard-earned export earnings. Consequently, China, alongside other commodity-rich nations in Africa, has sought alternatives and is actively pursuing dedollarization strategies.
India, under the leadership of Prime Minister Modi, has emerged as a prominent voice in this movement. The country's substantial gold reserves, both in official holdings and private hands, position it well for dedollarization efforts. India, along with other BRICS nations, is exploring a basket index format to stabilize its currency and reduce dependency on the US dollar.
In the upcoming battle for stakes to be the world's powerhouse for IPR and manufacturing, India also has many advantages over China, such as its democratic system, English-speaking aspirational workforce, stronger legal and intellectual property rights protection, more diversified economy and higher growth potential.
Dedollarization not only addresses economic concerns but also carries profound geopolitical implications. It promises to decolonize the global south from centuries of exploitation, enabling nations to break free from the chains of inflation and artificially suppressed commodity prices. This shift will rebalance manufacturing and consumption, end the bottomless exploitation enabled by intellectual property rights, and provide a more equitable distribution of global resources.
CONCLUSION
In the end, dedollarization represents a pivotal step towards decolonization. As countries like India, China, and others in the global south seek to reclaim economic sovereignty, the shift away from the US dollar's dominance heralds a new era of financial autonomy, equitable trade, and geopolitical rebalancing.
REFERENCES
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