US Recovery is Anybody's Guess

Most developing countries are rightly criticizing the US for triggering the global recession---or what some are calling the Great Depression Part Two. Regardless, emerging and least developed economies are depending on a rebound in the US economy to continue the pre-crisis flows of aid-assistance and US consumption driven growth they became accustomed to when times were good.

You can imagine, a progress report from the infamous Larry Summers, Director of the National Economic Council would probably gain the up most attention for anyone hoping for so called "green shoots" in the economy that could finally signal the bottom of the recession. The only problem is that many progressive economists aren't buying Summers' optimistic forecast about the future. Read this emotional post by Robert Kuttner in the Huffington Post that practical considers the Obama Administration's predictions semi-delusional.

Corporations are reaping enormous profits this quarter in the US and many consider it yet another sign that the recession is on its way out. But think again, the profit margins this quarter for a few corporations are matched with a trend toward a generally uneven scenario. The Federal Reserve has suggested that the the economic recovery could be coupled with increasingly high unemployment.

Asian countries may be showing signs that their level of dependency on a US recovery may be weakening. While the rest of the world watches for a speedy recovery in the US economy they will likely hedge against the dreaded "W" shaped recovery warned of by skeptical economists. Prime Minister Wen Jiabao, has announced China's intentions to spend money from its foreign exchange reserves in order to purchase companies struggling during the economic crisis---not America's troubled financial assets.

All About the Benjamins Baby? The End of American Dollar Hegemony

There is an ever growing possibility that the US dollar's privileged status in the world economy may be eroding, permanently. A necessary step toward a more multi-polar world, why didn't this happen aeons ago?

It was 3 months ago when President Lula da Silva of Brazil remarked that white "blue-eyed bankers" were to blame for the global financial crisis. President da Silva's comments were just one of many diatribes among post-colonial nations against centuries old European and particularly American influence over the world's financial institutions.

Today, emerging powers in the global South met in Russia to discuss a drastic move toward transformation of the global financial architecture. The New York Times, in its standard neoliberal form, fasely described the meeting as a narrow attempt by Russia to challenge perceived American hegemony in the world-system.

For the Kremlin, undermining the dollar as the prevailing medium of exchange reflects a broader Russian belief that the United States exercises a dominance in global affairs that exceeds its diminishing power.

But the article misses the point, which is that something new and of historic proportions is happening in the world economy. In reality, the United States actually does exercise dominance in global affairs that exceeds its diminishing power. Since the 1970's the US dollar has had a virtual monopoly on global exchange. Raw materials, for example are bought and sold for U.S. dollars. Exchange rates between currencies are not fixed but fluctuate all the time, depending largely on speculation about interest rates, and trade balances. There has been no shortage of protest among developing nations against this form of American hegemony.

Today's agreement by China, Russia, India, and Brazil to possibly buy one anothers bonds to lessen dependence on the U.S. , could finally begin a structural shift against the supremacy of the US dollar. Bloomberg Financial News, citing economist Nouriel Roubini, recognized the impending effects of a push-back against US dollar hegemony.

For the U.S., a change in the role of the dollar would risk increasing its financing costs and undermining its preeminent place in the world economy...The currency has dropped 10 percent against the euro in the past three years.

A more horizontal structure of international trade would essentially take out the US as middle-man and level the playing field for developing countries. For the first time in the recent history of global capitalism, there may not be a sole hegemon that controls international exchange. And that may not be such a bad thing.