Trump Confronting Multiple Threats to US Primacy

Protecting the US dollar from other competitors seeking to emerge as the unit of account in international trade and as a store of value is existential to the financial stability of the US dollar.

- M.D. NALAPAT

It may be regarded as hyperbole to claim that the US is facing threats that are existential to that country and its way of life, but such may indeed be the case. The first threat is the US debt, which is now closing in on $40 trillion and counting. Should the debt begin to be called in by those holding them, after a point the US would have to default on it, thereby shaking up not only its own financial markets but those of the rest of the world. Small wonder that President Donald Trump cautioned BRICS not to adopt a BRICS currency, or he would impose 100% tariffs on them.

As it turns out, even earlier the External Affairs Minister, S. Jaishankar, acting in consultation with Prime Minister Narendra Modi, had said that India was opposed to any effort to set up a BRICS currency. The US dollar (USD) has long been not just by far the most popular medium of exchange in international trade, but also an even more popular store of value. Not just legally but illicitly as well, individuals from across the world have used the USD as a store of value. As a consequence, successive US administrations have papered over an ever-growing deficit by the simple expedient of printing more dollars, taking advantage of the practically limitless international appetite for the dollar as a store of value. Were that appetite to flag, a crisis would erupt where the US national debt is concerned. Hence the warning by President Trump to other countries not to attempt to create substitutes for the dollar.