America’s growth comes from the US dollar – Dainik Savera Times

Despite the global recession, the US economy is still showing growth. However, the growth of the US economy comes not from the real economy such as manufacturing, but from the global reserve currency status of the US dollar. Due to fluctuations in the exchange rate of the US dollar, the US can achieve economic growth when the world generally suffers from recessionary crises. However, the US’s use of exchange rate swings is very harmful to the world economy. This will ultimately cause other countries to lose confidence in the US dollar.

Over the years America has always invested large amounts of US dollars in the international market. When the economies of developing countries overheated and bubbled up, the US changed interest rate policy accordingly, which forced dollars and their earnings around the world to flow back into the US. This caused developing countries to essentially sell assets after devaluing their currencies, and at this time the US could use the US dollar to purchase large amounts of international assets at low prices. Each fluctuation of the US dollar exchange rate results in the assets of many countries falling under the control of US capital, while the US can achieve economic growth without developing a real economy. The US always maintains itself in the most advantageous position through the fluctuations of the US dollar exchange rate.

Over the past few decades, the US has transferred a large number of energy-intensive and polluting manufacturing industries to other countries, while retaining only high-tech industries, financial and business services, etc. After the end of World War II, the American economy once accounted for half of the world’s GDP. Using the “Marshall Plan” to promote economic recovery in Europe, the US also took the opportunity to establish the dominance of the US dollar in the world. On the other hand, the source of persistent dollar crisis is America’s financial policy. For example, the Asian financial crisis in 1998 and the US subprime mortgage crisis in 2008 ultimately benefited the US, while many developing countries fell into the middle-income trap, and even reverted to underdevelopment. According to the Economist magazine, other countries of the world transfer about US$2 trillion to the US every year. If the dominance of the US dollar ends, its purchasing power will reduce by 30%.

The United States has long neglected domestic manufacturing and encouraged the relocation of manufacturing overseas, resulting in much of its infrastructure becoming old and dilapidated. But America spends a lot of money every year to support dollar hegemony. The US defense budget is set to reach US$813.3 billion in 2023, greater than the GDP of most developing countries. Developing countries supply large amounts of goods to the US, which helps the US avoid inflation. However, America’s reliance on financial hegemony rather than the real economy to sustain economic growth will not be sustainable.

(Courtesy- China Media Group, Beijing)