The Decline of the Dollar Is Not the Decline of the United States

Editor's Note: Last week, we published a five-part series authored by ETM Analytics, an economic and financial advisory firm with offices in the United States and South Africa. We noted then, as we do now, that their conclusions and assessments differ from some of our own. This week, we publish the following report that amplifies the points of accord as well as the differences. The collaborative effort is an innovation for both of us. We believe the sum of Stratfor's and ETM's analyses, where they converge and diverge, is of value in our ongoing dialogue with readers.

Stratfor agrees with several of the assertions put forth by our friends at ETM Analytics in last week's series on global macroeconomics. We agree, for example, that the United States sits at the center of the global financial system and that the Federal Reserve's actions will ripple throughout the world regardless of whether that is the governing board's intent. The Fed's core mandate, for better or worse, is stewardship over the U.S. economy, and its concerns for the health of the global economy are secondary. There is no doubt that the United States' dominance of the global financial system can put other countries at risk.
 
That risk will continue to drive other countries to protect themselves financially, limited though their options may be. In truth, the only powers that could realistically challenge the United States' economic dominance are China and Europe. But neither can offer a distinct alternative to U.S. financial hegemony, a view that Stratfor shares with ETM Analytics. To supplant the dollar as the global reserve currency, the rest of the world would have to undertake the long and onerous process of building a consensus. But the dollar would still be an instrumental, if diminished, currency in whatever system that process created. In other words, the weakening of the dollar in global finance would not be synonymous with a weakening of the United States' status as a global superpower.