Transcription
If we look around the world today, we can see that there are significant changes happening, and they're not only political but also economic. Now, the return of Donald Trump as US president is not the cause of these changes, but Trump and his policies are accelerating these significant changes that we see happening in the world. And a good example of this is de-dollarization. This refers to the movement by countries around the world seeking alternatives to the US dollar as the global reserve currency. De-dollarization did not start with Trump. This is a trend that goes back decades. But many of the policies implemented by Trump, in particular, his tariffs and sanctions, but also other measures like Trump's pressure on the central bank, the Federal Reserve, to reduce interest rates, and the firing of US government officials, like the chief of the Bureau of Labor Statistics, plus fears of rising inflation in the US. Altogether, these factors have resulted in a significant increase in de-dollarization.
And in the first six months of Donald Trump's second term as US president, the dollar saw the largest fall since 1973, which was the year of the major OPEC oil crisis. From January through the end of June 2025, the dollar fell by more than 10% compared to a basket of other major currencies. And since then, it has fluctuated a bit, but the trend is clear. Investors around the world have been selling US dollar assets and seeking alternatives. A big reason for this, not the only reason, but a big reason is because Trump threatened massive tariffs on countries all around the world starting in April. And a few days after Trump first announced these tariffs, the head of foreign exchange research at the major German bank Deutsche Bank published a note in which he warned that, quote, "We are witnessing a simultaneous collapse in the price of all US assets including equities, that's stocks, the dollar versus alternative reserve, FX, foreign exchange, and the bond market. We are entering uncharted territory in the global financial system." End quote.
This top official at this major German bank then went on and he wrote, quote, "The market is rapidly de-dollarizing. In a typical crisis environment, the market would be hoarding dollar liquidity. Dynamics here seem to be very different. The market has lost faith in US assets. It is actively selling down the US assets themselves. US administration policy is encouraging a trend toward de-dollarization to safeguard international investors from a weaponization of dollar liquidity." End quote.
Now, since Trump first announced those tariffs in April, there's been a lot of uncertainty and a lot of volatility in global capital markets. The dollar has gone down and up a bit. The US stock market first crashed and then it's seen a massive rally. The US bond market has also seen a lot of volatility. But despite the day-to-day fluctuations in different markets, the message to take away is that more and more people around the world, not only foreign governments but also foreign investors, are looking for alternatives to the US dollar. And some very mainstream, prominent economists in the US are now sounding the alarm bell and saying very clearly that we could rapidly see the end of US dollar dominance.
One of these American economists who is very worried is Barry Eichengreen. Now, I need to emphasize that Eichengreen is as mainstream as an economist gets. He's a professor at the prestigious University of California, Berkeley economics department, and he's an expert on the dollar system. He's written many books about the dollar system, and I, in my analyses here, have sometimes quoted his book, "Exorbitant Privilege: The Rise and Fall of the Dollar and the Future of the International Monetary System." Now, Eichengreen is not a critic of the dollar system. In fact, if anything, he's a defender of the dollar system, and he works with many mainstream institutions. In fact, he's a research associate at the US National Bureau of Economic Research. Which is why I was surprised to hear that in an interview he did with Bloomberg, Eichengreen warned that we could soon see the rapid decline of US dollar dominance. Eichengreen spoke about this in an interview with the Bloomberg podcast "Trumpanomics." The episode was titled "Why the End of US Dollar Dominance Is Now Possible." And in this clip that I'll play here, you can hear the Bloomberg host asking about the possibility of a dollar rout, which means a significant fall in the US dollar.
>> Possibly. We don't care so much about a gradual decline of the dollar, or at least if one is just thinking about the sort of stability of the global system. We'd be much less worried about that than we would a sudden questioning of the US government's creditworthiness and a dash for the exits from the dollar. I mean, Barry Eichengreen, how much do you think the probability of that kind of dollar rout has gone up in the last year or so?
It has certainly gone up. If you're asking me for a number, a stat, I cannot provide. But I would have been dismissive of those stories of a rout until this year. I would have agreed with the CEA that the most likely scenario is a gradual transition to a more multipolar system. But I think we now need to entertain the possibility of a rout as well, simply because of the level of noise and chaos in terms of US economic policy. And I do worry that if there is a sudden big move in the value of the dollar because foreign official and private investors grow significantly more reluctant to hold and use it, that could destabilize the US Treasury market. That could destabilize important financial institutions that hold dollar-denominated assets that are suddenly losing value on the foreign exchange market. That could have quite dire consequences were it to occur.
Now, those comments were very revealing because for years, Eichengreen has been a critic of people who have argued that US dollar dominance could soon end. Instead, Eichengreen has argued that, as he put it there, what's more likely is a gradual, slow decline in US dollar dominance and the move gradually to a more multipolar financial order. But now he's acknowledging that many of the policies carried out by the Trump administration have accelerated the move toward de-dollarization, and dollar dominance could end even more quickly than he and many other mainstream economists thought. This is very significant because, again, we're talking about a top American economist who has published dozens of research papers, for instance, for the International Monetary Fund, the US-dominated IMF based in Washington D.C. He's as mainstream as it gets. In fact, I want to briefly look at two research papers that were published by Eichengreen at the IMF that detail the gradual erosion of US dollar dominance that is now speeding up very quickly.
In 2022, Eichengreen was the co-author of a report titled "The Stealth Erosion of Dollar Dominance." This research paper looked at the currency composition of the foreign exchange reserves of central banks around the world. And it found that in the roughly two decades from 2000 until 2021, the share of US dollar assets in foreign reserves declined from 70% to just under 60% in two decades. And since that report was published, the share of the US dollar in global foreign reserves has only continued to fall. As of early 2025, it was less than 58%. And this is only the official data. There is evidence suggesting that some central banks have been holding some other reserves unofficially because they're afraid of Western sanctions and Western governments freezing and seizing their foreign reserves, like Western governments did to Russia, Venezuela, and Iran. So the actual share of US dollar assets in global foreign reserves is probably even lower and declining every single year.
This March 2025, Eichengreen published a long article in the Financial Times discussing the very real risks of US dollar dominance ending. Eichengreen looked at some very important data points that should really raise some eyebrows about the dollar system. For instance, he pointed out that the dollar system was largely designed after World War II, especially in the 1944 Bretton Woods conference, when the US dollar was officially made the global reserve currency, and the dollar was pegged to gold, and other currencies were pegged to the dollar at fixed exchange rates. Well, at that time, in the late '40s up until 1950, the US economy made up around 25% of global GDP, measured at purchasing power parity. However, since then, the US share of the global economy has fallen drastically, and now it's less than 15%. Furthermore, after World War II, the US represented around 25% of all global exports. The US was a manufacturing superpower at that time, but the US economy has de-industrialized and financialized. And since the 2010s, the US has represented less than 10% of global exports of goods, not services, exports of goods. However, as the US economy has de-industrialized and financialized, the dollar system became more important in attracting foreign investors in inflating big bubbles in US capital markets. So even though today the US represents less than 15% of global GDP, PPP, the US stock market represents over 60% of the total market capitalization of all of the stock markets around the world. And there was a decrease following the 2008 financial crisis, but the US just reinflated that massive financial bubble that is totally out of proportion with the US share of the global economy.
So the point to take away from this is that when the US designed the dollar system at the end of World War II, the US was the major economy in the world. It was the largest economy. It was the largest manufacturing power. But the situation has changed drastically, and now you have the rise of other major economies, especially China, which is now the largest economy in the world. It has been since 2016 when you measure China's GDP at purchasing power parity, and China's share of the global economy is increasing year by year while the US share is falling. Moreover, China has become the world's manufacturing superpower, representing around one-third of global manufacturing value added, whereas the US share of global manufacturing has been falling on a secular, long-term basis. So, as US economic power has been declining and as US political power has been declining, it's only natural that more and more countries are seeking alternatives to the US dollar.
But defenders of the dollar system argue that there's no realistic alternative to the dominance of the US dollar. They constantly say that the dollar is the "cleanest dirty shirt in the laundry." That's their main talking point. They say there are no other capital markets that are as big and as deep and as liquid as US capital markets. There is no alternative. But in another research paper published at the IMF, this top US economist Barry Eichengreen pointed out that there are alternatives that exist, and one of the biggest ones is gold. Eichengreen's research shows that there's been a large increase in the official gold holdings in the reserves of central banks around the world. And this trend started in 2009, which I think is not a coincidence. It was largely in response to the financial crisis that started on Wall Street in the US financial sector and then spread to other countries. And by the way, 2009 was also the year that BRICS was formed. And since then, BRICS has massively expanded. The Global South organization now has 10 members and 10 partner countries for a total of 20 countries. And together, they represent 44% of global GDP measured at purchasing power parity and over half of the world population, 56% of the global population.
And if you look at the research by this mainstream US economist Barry Eichengreen and his research paper on foreign central banks buying lots and lots of gold, you can see that many of these foreign central banks are in or around BRICS. Some of the biggest purchasers of gold in the past two decades have been Russia and China and India, which are founding members of BRICS. Other major purchasers have been Uzbekistan and Thailand, which are now partner countries in BRICS. And you have Turkey, or Turkey, and Saudi Arabia, which have been invited to join BRICS, although they haven't given a response because these countries like to play the West and the East against each other to serve their own interests. But the point is, is that if you look at the top 10 largest buyers of gold in the past 20 years, the vast majority of them are BRICS countries, and they are de-dollarizing. This is not just a hypothetical thing they will do in the future. They have been actively de-dollarizing for years, and this didn't start with Donald Trump. I need to emphasize that. But Trump's attacks and tariffs have accelerated the process of de-dollarization.
And in this IMF research paper, Eichengreen and his colleagues noted two main reasons why foreign central banks are buying lots and lots of gold. First of all, gold appeals to central bank reserve managers as a safe haven in periods of economic, financial, and geopolitical volatility. And wow, in Donald Trump's second term, this has been a period of significant volatility economically, financially, and geopolitically. So that's one of the main reasons. The other main reason why central banks have been stockpiling gold is, as this research paper notes, the imposition of financial sanctions by the US, Europe, and Japan, by the collective West, which has led central banks to seek gold because it's much more difficult for Western countries to seize their gold like they did to Russia's central banks in 2022. The US and Europe froze more than $300 billion worth of dollar and euro-denominated assets. It's pretty easy for the US Federal Reserve and the European Central Bank to do that. It's difficult for foreign governments to seize Russia's gold reserves unless Russia has its gold reserves in another central bank. Like, for instance, Venezuela had billions of dollars worth of gold that belongs to the Venezuelan central bank that were physically being held in the Bank of England. And the British government stole that gold from Venezuela and refuses to get it back. This was during the coup attempt in Venezuela led by the first Trump administration in 2019. And even though that coup attempt clearly failed, the Bank of England has refused to give that gold back to Venezuela. And we all know that Western governments are not going to give back the $300 billion worth of assets they froze, in scare quotes, from Russia. They didn't just freeze it. They seized it. They stole it. So this was a huge wake-up call to central banks around the world. They saw that Western governments, Western pirates, stole the central bank reserves of Iran, Venezuela, Afghanistan, and then they went after Russia. And a lot of countries said, "Wow, if they can take Russia's reserves, they could easily take our reserves as well." So more and more countries, especially in BRICS or interested in BRICS, Global South countries, have been piling into gold as an alternative to the US dollar.
But that's not the only reason that's leading to the decline of US dollar dominance. I made a list of the major factors that are fueling de-dollarization. I already talked about the use of sanctions and the weaponization of the US dollar. One-third of all countries on earth are currently suffering from some form of US sanctions, the vast majority of which are illegal because they are unilateral. They violate international law. And if you look at the number of sanctions applied per president, you can see that it just keeps going up and up ever since George W. Bush. This is bipartisan. Under Bush and Barack Obama and Donald Trump in his first term and Joe Biden, each president imposed thousands of sanctions. So that's a very significant reason driving de-dollarization.
Another is Trump's threats of tariffs and his economic attacks on many countries, including longtime allies like Europe. Trump imposed an unequal treaty on Europe, levying 15% tariffs on European exports to the US, while Europe is not allowed to retaliate with its own tariffs on US goods. So, this is leading many countries to rethink their trade dependency with the US. Furthermore, this is fueling de-dollarization because if other countries can't trade with the US, then they simply won't have enough dollars to do all of their international trade and investment using US dollars. Trump has repeatedly said he wants to end the US trade deficit with the rest of the world, which is called the US current account deficit. But ironically, in order to maintain US dollar dominance, in order to maintain the dollar as the global reserve currency, the US has to run a chronic current account deficit, a trade deficit with other countries, because other countries need to get access to dollars in order to use dollars in international trade and investment. So if Trump is truly serious about reducing the US current account deficit, it's going to inevitably lead to further de-dollarization. And this is just one example of the many contradictory policies being carried out by the Trump administration.
Another is that Trump is constantly pushing for lower US interest rates, and he's putting a lot of pressure on the US central bank, the Federal Reserve, and foreign investors are worried about what they call the end of so-called central bank independence. Now, this is a very neoliberal concept that has been promoted by the US and the IMF and the World Bank for many decades. In reality, most central banks are not truly independent. There's always political pressure, and there's always pressure by the financial sector. And essentially, this neoliberal doctrine says that investors, that Wall Street, that capital markets should determine what interest rate policy is, and not the government, not the people, not democracies. So it's inherently an undemocratic concept that serves the interests of investors and large corporate interests. But even though I'm critical of this whole idea of so-called central bank independence, a lot of foreign investors take this very seriously. And this means that if they're afraid of the end of central bank independence, or the illusion of it in the United States, they may start to sell off their US assets. So it doesn't matter what I and critics of this concept think. It matters what holders of US dollar assets think. And a lot of these foreign holders are getting uncomfortable with Trump's policies. And this could lead to a further sell-off of US dollar assets, which could lead to a further decline in the value of the dollar against other major currencies and further de-dollarization.
And in particular, what Wall Street is concerned about is Trump's attempt to fire the chair of the Federal Reserve, Jerome Powell. Trump has repeatedly attacked Jerome Powell, who's supposed to be independent. Although, ironically, it was Trump who appointed Powell as the head of the Fed during Trump's first term as president. But regardless, on his social media platform, Truth Social, his copy of Twitter, Trump has constantly attacked Powell, claiming, quote, "He is too late, and actually too angry, too stupid, and too political to have the job of Fed chair." End quote. And because of the doctrine of so-called central bank independence, Trump, as the US president, technically cannot legally fire the chair of the Fed. So Trump has been desperately looking for an excuse to fire Powell. And this led to this hilarious photo op where Trump went to go see the renovations being done at the Federal Reserve building with Jerome Powell, and they had these hard hats on, and you could see that Trump was clearly angry, and he was heavily pressuring Powell to reduce interest rates because Trump wants to stimulate the economy.
The main interest rate set by the Fed is the overnight lending rate, and it's known as the Fed funds rate, and it has been quite high since 2022 because there was very significant consumer price inflation in the US coming out of the pandemic. So the Fed rapidly raised interest rates to try to bring down that consumer price inflation. Trump wants to significantly bring down the Fed funds rate from 4.33% to 3% or even 2%. And this is not only because Trump wants to stimulate the economy, but it's also because Trump is desperate to bring down the interest payments that the US government is paying on its massive debt. Because as the Fed raised interest rates, that meant that the yields on Treasury securities, that is US government debt, climbed higher and higher, which meant that each year the US government now needs to spend more and more just paying the interest on its debt. Whereas after the 2008 financial crisis, interest rates were very low, basically zero, which meant that even though the US government had very high debt that was growing, the interest payments were relatively low because the yields on US treasuries were also very low. But after the Fed raised interest rates, yields have now been very high. And as of 2024, the federal government has been paying 3% of GDP just on the interest on its debt. And the US federal debt is over 120% of GDP, which can be managed if interest rates stay low. Japan has had its public debt at over 200% of GDP, but the interest rates in Japan are much lower than the interest rates in the US.
So, this is why the Trump administration has been desperate to bring down the yields on US Treasury securities, especially the yield on the 10-year Treasury note, which is used to set interest rates in other parts of the economy like mortgages and car loans. And Trump, as his Treasury Secretary, appointed the billionaire hedge fund manager from Wall Street, Scott Bessant. And Bessant has repeatedly made it clear that he is committed to trying to bring down the 10-year Treasury yield, but Bessant has failed to do so. The 10-year yield has stayed pretty consistent between around 4.25% and 4.5%. And there also has been some pretty significant volatility, like massive fluctuation after Trump announced his tariffs initially in April. Bond yields temporarily fell to under 4% and then they shot back up to 4.5%. And this significant volatility in the bond market has scared a lot of foreign investors.
And what the US government is especially concerned about is foreign investors dumping their US Treasury securities. And what we've seen over the past decade is a pretty significant decline in the overall share of US Treasury securities held by foreign investors. In 2015, it was around 34%, one-third of US treasuries that were held by foreigners. And in the past decade, it has fallen by 10 percentage points. And in the past few years, less than 25%, less than a quarter of US treasuries are held by foreigners. And if you look at central banks around the world, one of the biggest net sellers has been the People's Bank of China. China has significantly reduced its holdings, at least its official holdings of US Treasury securities, particularly since 2022 when, in response to the war in Ukraine, Western governments seized Russia's dollar and euro holdings, and this scared authorities in Beijing.
But at the same time as BRICS countries have been de-dollarizing, we've seen that in Europe, more and more investors in Europe have been buying US Treasury securities. So you can see this as a kind of de-risking. Adversaries of the US, countries at least being targeted by the US government, have been reducing their exposure to US government debt. Whereas investors in allied countries or vassals, like in Europe, they have been increasing their holdings of US debt. And what's also interesting is to compare foreign private holders of US treasuries versus foreign official investors. You can see that following the seizure of Russia's assets in 2022, there was a significant decline in foreign official holdings of US treasuries. But in the past few years, there's been a marked increase in foreign private investments in US treasuries. And a key reason for this is that hedge funds, including foreign hedge funds, have been buying lots and lots of US Treasury securities in order to engage in a sophisticated form of arbitrage known as the basis trade. However, this has also been risky because a lot of this is based on big leverage, on taking lots and lots of debt in order to engage in this arbitrage that involves a few basis points. I mean, the difference in these markets is very small, and the amount of leverage is very high, so it's very risky. And we actually saw an example of this in April when Trump initially announced his tariffs. This led to a temporary crisis, significant volatility in not only the US bond market, it also spread to other bond markets around the world as hedge funds were forced to sell the US Treasury holdings they had because they had margin calls. The people who lent them money wanted to make sure that the hedge funds could actually pay back the lenders. So, what happened is that the yields on US Treasury securities shot up, especially not only in the 10-year, but also on the 30-year bond. There was an increase to over 5%, which was the steepest increase since 1981. And as I said, this caused significant turmoil in other bond markets, especially in the Japanese bond market.
So the point that I'm trying to stress here is that the Trump administration really wants to bring down the yields on US Treasury securities, especially the 10-year note. But it's much, much easier said than done. The US economy is so financialized, and there are so many moving parts and different factors all coming together that make this very difficult and very risky because essentially, the US economy is built on this massive financial house of cards. These huge bubbles in not only the US bond market but also the US stock market. And whenever there's a crisis in the US bond market, it often leads to a sell-off in the US stock market, which could also lead to a fiscal crisis in the US. Because as stock prices fall, it also leads to a fall in tax receipts for the US government. So there are all of these factors that are linked together that make it very hard for the US to try to bring down these Treasury yields.
And this is also a cause for concern for many US corporations because as the US government's borrowing costs are increasing, corporate borrowing costs are also increasing. Goldman Sachs, the major US investment bank on Wall Street, published a note about this in 2023 titled "The Corporate Debt Maturity Wall," noting how the Fed's tightening cycle, raising interest rates, has also led to an increase in corporate bond yields. They showed how as the Federal Reserve raised interest rates in 2022, it led to a significant increase in corporate bond yields. During the pandemic in 2020 and 2021, investment-grade corporate bond yields were just around 2%. But since then, they have shot up to over 5%. And although a lot of US corporations piled up on debt when interest rates were very low during the pandemic, there still are hundreds of billions or even trillions of dollars worth of corporate bonds that mature in 2025, 2026, 2027. And now the interest rates are much higher, which means that these corporations have to spend much more on borrowing. And this is another major reason why Trump is putting so much pressure on the Federal Reserve to reduce interest rates. It's not only because the US government wants to bring down the interest payments on US federal debt, which is 120% of GDP, but it's also because many corporations are worried about refinancing their own corporate bonds at much higher interest rates.
So this explains why Trump has been putting so much pressure on the Federal Reserve. But this is also another reason driving de-dollarization. Foreign investors look at the debt situation in the US. They look at the pressure to bring down interest rates, and they say, "Why would I invest in US Treasury securities and other US assets, especially when there are fears of persistent high inflation, which would lead to negative real yields if you buy Treasury securities when interest rates are lower than inflation?"
And this brings me to another significant reason driving de-dollarization in the US, which is the fear of persistent high inflation. Now, Trump and his supporters have claimed that supposedly his sky-high tariffs are not going to cause further inflation, but that's ridiculous. More and more evidence is showing that inflation is already increasing. Now, there were delays because for months Trump issued extensions. He went back and forth on his tariffs. He announced new deals. There was a lot of uncertainty. And also because before Trump initially announced the tariffs in April, a lot of companies in the US were stockpiling and buying massive amounts of imports. As soon as Trump entered office in January, they knew he was going to impose these tariffs. So they bought massive amounts of imports in anticipation of the tariffs, but these stockpiles have been running out, and the tariffs have been coming into place, and there's now a little more certainty. And lo and behold, we've seen that prices have been steadily rising in the US.
Now, economists in the US typically use two different metrics to measure inflation. There is CPI and PCE. PCE is preferred by the Federal Reserve. CPI is used by most economists. If you look at both of them, there has been a significant increase in inflation in the past few months, and the trends look like inflation will keep rising, not fall. There's also been a massive increase in the price of services in the producer price index, PPI, and this is the largest increase since the pandemic. So, we're now seeing that after a few months of uncertainty and extensions as Trump's tariffs go into effect, there is going to be a marked increase in inflation. We're already seeing it in the data. So, this is really a perfect storm that is also driving de-dollarization because foreign investors will say, "Wait a second. Inflation is obviously increasing in the US, and yet Trump is heavily pressuring the Federal Reserve to reduce interest rates, which will only further fuel inflation, and it will also lead the US dollar to fall against other currencies." So, a lot of foreign investors are going to say, "Wait a second. Why would I invest in US dollar assets?"
If I'm in Europe, for instance, why would I invest in US dollar assets if one, the dollar falls against the euro, which means that even if you have a bond that, you know, has a 4.5% interest rate, if it's a US Treasury security, you're being paid back in dollars, and yet you need euros, and the dollar has been falling against the euro. So, why would you invest in US treasuries? That's one issue. And then the other related issue is that if inflation in the US continues to pick up at 4% or 5%, but then Trump is artificially bringing down interest rates, and then let's say the Federal Reserve does quantitative easing and starts buying up Treasury securities again to bring down the yields, you're going to start having potentially even negative real yields. So it's a horrible deal. So the logical response is that more and more foreign investors are either not purchasing US assets or they're thinking about selling their US assets, fueling de-dollarization.
And then the final cherry on top of all of this madness is Donald Trump fired the commissioner of the Bureau of Labor Statistics, the BLS, which is responsible for providing very important data about the US economy. And without any evidence whatsoever, Trump absurdly accused the BLS chief of supposedly rigging the job data to make him and the Republicans look bad, which is completely ridiculous. And the result of this is obvious. Around the world, fewer and fewer people are going to trust official US economic data. And not just foreign governments, foreign central banks, but also foreign private investors. They're going to say, "Wow, Trump is just appointing a yes man to lead the Bureau of Labor Statistics who's just going to report whatever data Trump wants." So, they're no longer going to trust US economic data. And they're going to de-risk. They're going to invest in fewer US assets or even sell off US assets. So, all of these factors are coming together to fuel de-dollarization.
And the final one that I have here on this list today is the fear of a so-called "Mar-a-Lago Accord," which is a reference to the attempt by the Trump administration to force other governments to sign a deal with the US where the US will significantly devalue the US dollar against other major currencies. This idea has been discussed by Trump's top economic adviser, Steven Mnuchin, who's the chair of the US Council of Economic Advisers. I discussed this in a previous report in a video, which I will link to in the description below. Mnuchin delivered a speech at a closed-door event at a neoconservative think tank in Washington that is closely linked to the Trump administration. He gave these remarks in April, just a few days after Trump initially announced his tariffs on so-called Liberation Day. And Mnuchin, on behalf of the Trump administration, issued five demands to other countries, essentially ordering them to pay tribute, imperial tribute to the US, to benefit the US at their expense. And one of these demands was literally that other countries should write checks to the US Treasury.
>> They could simply write checks to Treasury. That would help us finance global public goods as well.
In November 2024, just a few months before Trump returned to the White House and appointed Steven Mnuchin as his top economic adviser, Mnuchin published a lengthy report that was titled "A User's Guide to Restructuring the Global Trading System." And in this document, Mnuchin talked about the idea of the so-called "Mar-a-Lago Accord." And he noted that this was inspired by the Plaza Accord that the Ronald Reagan administration imposed on its allies in 1985. The US forced European countries and Japan to allow their currencies to significantly appreciate against the US dollar, which essentially was a devaluation of the dollar. This also fueled a massive asset price bubble in the Japanese economy that popped at the end of the 1980s and caused significant financial problems in Japan. So today, the Trump administration wants to try to do basically the exact same thing. And maybe the Trump administration could force its vassals, its so-called allies in Europe, to do what they did in 1985 with the Plaza Accord. But there's no way that Trump will convince China and other major economies in BRICS to do the same thing because they know very clearly that the Plaza Accord caused significant problems in Japan. They learned from history and don't want to repeat Japan's mistake.
So what does the Trump administration want to try to do? Well, Trump's top economic adviser, Steven Mnuchin, spelled it out in this report that he published in November. He floated the possibility of issuing century bonds, that is 100-year bonds. That is, the US government gives you this bond, you lend money to the US government, and Washington says to you, "We will pay you back in 100 years, and during that century, we will pay you a very low interest rate, below the current market interest rates being offered at auctions today for US Treasury securities." And Mnuchin made it clear in this report that the Trump administration's strategy is to force other countries to hurt themselves on behalf of the United States. He said that they want to force other countries to strengthen their currencies in order to help the US devalue the dollar, which means that reserve managers at central banks in other countries will be forced to sell dollar-denominated assets. And as their currencies appreciate against the dollar, according to Steven Mnuchin, this will give the US economy an advantage. US exports will be more competitive. He argues US manufacturing will be more competitive because US exports will be cheaper compared to other, let's say, German exports, if the euro significantly appreciates against the US dollar.
And then Mnuchin wrote, "As these foreign reserve managers are selling their US assets, what he wants is a quote, 'term out of remaining reserve holdings'," end quote. What does that mean? Translated into simple English, a term out is when you have short-term debt and then you refinance it for the long term. So, let's say you lent someone money and you promised to pay them back in one year. Well, if you want to term out your debt, you can tell them, "Okay, I'm going to pay you back in five years or 10 years," and you can offer some kind of interest rate. But what the Trump administration is potentially planning is forcing foreign investors, foreign holders of US government debt, US treasuries. It's telling them, "Okay, you bought a 10-year Treasury security five years ago. We promised you when you bought it that we would pay you back in five years. And when you bought that treasury at an auction, there was an interest rate, a yield on that treasury. Well, what the US government is now thinking of saying is, 'No, actually, we're not going to pay you back in five years. We're going to pay you back in 95 years. We're going to change this 10-year note or 20-year bond or 30-year bond for a century bond.'"
And adding insult to injury, what they're potentially talking about doing is paying a low interest rate on that century bond, which means that over time, the foreign holder is going to be losing value. They're lending money to the US government basically for free or for very low interest payments, probably below inflation or certainly below market interest rates. As Steven Mnuchin, Donald Trump's top economic adviser, as he wrote in this report, quote, "The US Treasury can effectively buy duration back from the market and replace that borrowing with century bonds sold to the foreign official sector." End quote.
Now, no logical person would accept this. This is obviously an extremely unfair agreement. But the Trump administration thinks that it can force its so-called allies, that is vassals, to accept this unequal treaty, just like how the US forced the European Union to sign this unequal treaty in which the US puts 15% tariffs on European exports to the US, but Europe does not respond with any tariffs on US exports to Europe. This is the Trump administration's strategy with the so-called "Mar-a-Lago Accord." It wants other countries to hurt themselves in order to benefit the US, to pay imperial tribute to the US government. And even though this hypothetical "Mar-a-Lago Accord" has not officially been announced, the fact that it's even being discussed has led to more and more interest in de-dollarization.
And as I've been stressing, it's not just foreign governments and central banks and BRICS countries that are trying to de-dollarize, but increasingly it's also foreign investors. It's foreign asset managers and investment banks and pension funds. They're all thinking about how they can de-risk, how they can reduce their exposure to US assets and the US dollar. So this is all contributing to de-dollarization.
Now, before I conclude here today, I want to look at one more article published in the Financial Times. I think this is the perfect example of the kind of discussion that's going on today in the mainstream financial press. De-dollarization is no longer some kind of fringe concept. It is mainstream academics, mainstream economists, and mainstream financial media outlets talking about this. This was an article published in July by an FT columnist. It's titled "The Frightening World Without the Dollar." This article noted that since Trump announced his massive tariffs on countries around the world in April, quote, "The greenback has behaved a bit like an emerging market currency rather than the world economy's monetary anchor, and there are plenty of reports that international investors are looking to move out of the dollar." End quote.
Now, earlier I analyzed the research done by the very mainstream American economist Barry Eichengreen, who is really a defender of the dollar system, but he's also a realistic observer, an objective observer, and he has also noted that there's been a marked decline in US dollar dominance in recent years, and it could speed up very quickly, very soon. Well, in this article in the Financial Times, the major newspaper cited another completely mainstream neoliberal economist named Kenneth Rogoff. And he now is also sounding the alarm bells about de-dollarization. He said, quote, "I certainly see a world where the dollar is on top, but less, much less than it was. The rest of the world is going to reroute trade, reroute finance, and try to depend less on the dollar." End quote.
Now, given who it is making these remarks, this is very significant. Kenneth Rogoff, or Ken Rogoff, is a mainstream economist, a neoliberal center-right economist at Harvard University. He's as mainstream as it gets. And in fact, Rogoff has constantly been criticized by economists for being a staunch advocate for austerity. He's a complete neoliberal. After the 2008 financial crisis in the US, he called for austerity, and many economists tore apart his research and all his talking points in defense of austerity. Rogoff is the voice of the status quo. The fact that now even Harvard elites like Rogoff are sounding the alarm bell about de-dollarization is a clear sign that this is now as mainstream as it gets.
In the Financial Times, Rogoff said this, quote, "We are absolutely at the biggest inflection point in the global currency system since the Nixon shock to end the last vestige of the gold standard." That was in 1971 when US President Richard Nixon ended the official linking of the dollar to gold. It had been, which had been established at the Bretton Woods conference in 1944 at a set rate of $35 per ounce of gold. Trump is in many ways very similar to Nixon. And just like how Nixon brought into effect a new kind of monetary order, it looks a lot like Trump is doing the exact same thing. And in this article in the FT, Ken Rogoff, this Harvard economist, went on saying, quote, "Into the foreseeable future, the dollar is likely to lose market share mainly to China's renminbi, but also the euro." He noted that, quote, "This was happening for a decade before Trump. Trump is an accelerant." End quote. This is a point that I always emphasize in my analyses. This did not begin with Trump. What Trump is doing is he's accelerating all of the previous contradictions and he's putting the pedal to the metal.
The Financial Times noted that, quote, "More than a new global monetary hegemon, then we may be facing global monetary warlordism, a multipolar future." End quote. So when defenders of US dollar hegemony insist there are no alternatives, show them these kinds of reports in the mainstream financial press. Show them these comments made by extremely mainstream establishment economists like Kenneth Rogoff and Barry Eichengreen at elite US universities. De-dollarization is absolutely happening, and it is picking up steam. And defenders of US dollar hegemony will always say there are no alternatives, as those alternatives are currently being explored and developed. And it's not just going to be one currency that replaces the US dollar as a new global reserve currency. It's going to be increasingly a more multipolar financial order, just like how we're seeing a more and more multipolar geopolitical order with the rise of Global South organizations like BRICS. It's not a coincidence that BRICS is at the heart of global de-dollarization.
We are living in an absolutely historic moment. It is a watershed moment in history. We can see so many significant changes happening in the world around us. And if you want to understand what's going on, please make sure that you subscribe to our reporting here at Geopolitical Economy Report. I'm Ben Norton. I'm the editor-in-chief. Please like and subscribe. Please share this. Also, leave a comment below. Maybe you disagree with me. Well, share what you think with the rest of the audience. I want to thank everyone for joining me today. I will see you all next time.