The dollar as the monetary base of external credit in the US is also going through a very difficult time.
The phenomena that prevailed during the decade preceding the crisis to reinforce the hegemony of the dollar are victims of past excesses. These excesses are over because their effects are turned against the American currency.
Treasury bills sold abroad have the advantage of ensuring the hedging of the dollar and keeping the American currency afloat, support for these foreign exchanges which would be undermined by an acute monetary crisis caused by an uncontrolled depreciation of the American currency. Foreign savings, therefore, enter the US and ensures coverage of the country’s foreign trade. But does this savings still play a role, alongside US savings, in boosting the value of US financial assets? The answer to this question depends on preserving the monetary base of the dollar as the basis of $ -dominated credit generated outside the US.
US households are reforming national savings by partially reducing their consumption. This reformation of savings is paradoxical, it makes it less necessary to import foreign savings while the conditions of indebted households and the fragility of the financial system no longer allowed to put in place the vicious circle of previous growth. Households are deleveraging, financial market activities are still in slow expansion, investments follow a logic of restoring profit margins, so there is no need for massive inflows of foreign capital.
For the expansion of dollar-denominated capital abroad, the structural conditions for their expansion no longer exist.
Net activities of foreign assets dropped from their 2006-07 level. After deducting Treasury bills – which are fixed-yield securities – foreign acquisitions of securities would be even lower. These assets are no longer able by their volume to offer sufficient guarantees for the expansion of an offshore credit system by their simple quantitative growth.
Taking into account their necessary valuation in the US market, the very important role of treasury bills in foreign financial investments tends to have a negative effect on the dynamics of the valuation of financial assets held in the US by foreigners. Indeed, treasury bills are fixed yield, the share of treasury bills very important in the purchase of foreign securities is therefore detrimental to the role of boosting dollar credits issued outside the US.
We find here elements that plead for the formation of an alternative monetary order to the hegemony of the dollar, it is in Asia that this alternative order is the most necessary. The emergence of this order supposes that the countries of Asia, and more particularly East Asia, set up a regionalized monetary system and that convertibility of currencies is compatible with the emergence of a monetary and credit system. free of the dollar. Boxed exchange rates, a Yuan-Yen area could be the basis. This analysis can be extended to all emerging or emerging countries that will require dollar credits. The American crisis is changing into a chronic depression or slow Krach that is subverting the very foundations of the $ offshore credit issue through the accumulation of foreign capital in the US.
We have analyzed twice the mechanisms that make it necessary to exit the long period of the hegemony of the dollar in international trade and in offshore credits in $. It remains to show that short-term public policies are playing against the dollar and taking Sirius’ point of view on this paper.