What does Trump’s Celebration of the Resurgent Dollar Tell us about the International Monetary System?

On April 7, the U.S. President Donald Trump took the stage for the White House Coronavirus Task Force press briefing. In his speech, he targeted the World Health Organization (WHO) for mismanaging the Coronavirus pandemic. Trump criticized the organization for focusing too much on China, and accused its leadership of not being proactive enough in confronting the virus that led to its spread across the globe, culminating in a planetary pandemic that has so far (April 17) infected approximately 2 million people and claimed more than 125,000 lives globally. Defending his earlier steps to limit some travel to China that the WHO had criticized, President Trump, in essence, vilified the premier international health organization for the very failures that public health experts have identified in Trump’s response to the virus. The same experts have repeatedly criticized the President for his public denials of the dangers of the virus and his prioritization of the health of the U.S. economy over that of its people. Having exonerated himself of the guilt of having slowed the American response to the pandemic, including the scarcity of testing kits and protective gear, which turned the United States to the pandemic’s latest epicenter, Trump threatened with putting a hold on all U.S. funding to the WHO—the largest single source of money for the organization. In the midst of what a member of the White House Task Force, Adm. Brett Giroir, called the “peak death week,” Trump – the nation’s self-declared cheerleader – went back to his favorite topic, the economy, and cheered the U.S. public on:

We’re getting all of the investment wanting to come into the dollar. The dollar is the strength. The dollar is the whole ball game. And we have a strong dollar. Other currencies are going down, way, way down in some cases. You look at other countries, I won’t mention them, but other countries are going down 22%, 25%, 28%. and it’s very hard for them. That makes it much more difficult. With us, our currency is relatively now [sic] stronger than it ever was or it was over the last few years relative to other countries. It’s always relative to other countries, but our currency is very strong. So, therefore, people want to invest. If we do a bond issue to do infrastructure, everybody wants a piece of that issue, even at zero interest.

Trump’s threat to the WHO, issued at the height of the pandemic in the U.S., in order to absolve himself from any blame for the spread of the COVID-19 virus and score some points in domestic politics is simply despicable, yet predictable. What Trump’s words, and his celebration of the U.S dollar as the currency in the age of corona reveal is less the culprits behind the global pandemic, and more the very inequality on which our global economy is built. More directly, what Trump’s cheering reveals is the weaponization of the U.S. dollar that blatantly and literally cashes in on that inequality that is amplified in the era of corona: That inequality is the premise of our international monetary system and the condition of possibility for Trump’s celebration.

Let me be clear: this is not an attempt to explain away this celebration as a predictable move given Trump’s personality and the populism of his circle. Nor am I interested in acknowledging dispossession of neoliberal capitalism first, only to make a culturalist argument about the callousness of its American version second. That said, I do maintain that the historically and socially particular form that late-capitalist dispossession has taken under the Trump administration has to be analyzed in conjunction with his entourage’s concrete actions and actors. In other words, particularlity of this case, the celebration of the US dollar as the currency of crisis has to be thought through. In parsing this particularity, I want to suggest that Trump’s cheering of the US public and his celebration of the US dollar as the nation’s most important asset in our current moment is predicated upon the very formation of our international monetary system.

Our contemporary multiple currency system that is composed of hard (reserve) and soft (exchange) currencies is only about 60 years old. In the midst of another crisis with disastrous humanitarian and economic consequences, World War II, gold was gradually demoted from its role as the primary global reserve, while the proliferation of nation-states born out of defunct empires ushered in a staggering multiplicity of national currencies. Following shortly after the 1969 institution of a Special Drawing Rights of the International Monetary Fund to forge a new world reserve system, the gold backing of fiat money – inconvertible paper money made legal tenders by governments’ respective decrees – was abandoned altogether in 1971. The Special Drawing Rights, initially valued against the US dollar, gradually became valued against four reserve currencies: the dollar, the pound sterling, the euro and the yen. All other currencies have become so-called soft currencies, whereby relative hardness connoted the ability to hold value over time. With soft currencies confined to exchange functions came a spatial restriction on their zones of use, making sudden fluctuations in purchasing power for their users more likely as a function of political standing in the world as opposed to a vector of economic vitality. In the global hierarchy of monetary value—nonchalantly described as a spectrum of relative hardness—chronic uncertainty about a currency’s ability to hold value over time has become a structural feature for all but a select few of the world’s population. In other words, an overwhelming majority of the world was left to contend with money that did not perform all functions of the modern money form—what Marx has named as “God among commodities.” In our post-WWII context, however, some gods turned out to be mere mortals (soft currencies), or alternatively a select few emerged as the supreme gods (reserve currencies) among lesser gods. In any case, the Zeus of this new monetary cosmology was no other than the US dollar.

Since the beginning of the coronavirus outbreak that has brought the global economy to a standstill, the value of the US dollar has surged 7% against the basket of other hard currencies. The pandemic illustrated, however, that even those currencies considered to be hard might not be hard enough to stand the effects of the pandemic: While the pound sterling has so far lost more than 10% of this value—a level last seen in 1985, the Australian dollar has sunk to a 17-year low against the US dollar. Given that more than 60% of all bank reserves and 40% of all debt around the world is denominated in US dollars, there is in fact very little to celebrate: The flip side of “all investment wanting to come into the dollar” is a liquidity crunch—a shortage of actual dollars in circulation—that will drive up the dollar’s value and the cost of borrowing abroad in days and weeks to come. The long-term effect of an appreciating dollar on the U.S. economy is shrinking of markets for American exports because the relative purchasing power of others earning mortal money decreases, and fewer American products sold since they would be too expensive and less competitive in the global economy.

Celebrating the strength of the US dollar under these circumstances is akin to celebrating having the most ventilators in the midst of the pandemic, while others continue to suffer and struggle with their scarcity: it is sure to fuel contempt for the US globally as a hoarder of monetary value in a time of crisis. While 6.6 million more Americans have lost their livelihoods this past week alone, Trump’s celebration of the resurgent dollar seems misplaced not only internationally, but also domestically: With 16 million jobs gone in the past three weeks alone and with an unemployment rate predicted to reach 15% or higher—a level unseen since the Great Depression—many Americans might find little to celebrate in Trump’s cheers.

From access to health care to employment benefits, the coronavirus outbreak has brought to the fore the structural inequality and violence on which our contemporary world rests. These inequalities have generated several radical and previously unimaginable policy responses, such as direct payments to those who have lost their jobs, and free medical care for those infected with the coronavirus in the United States and elsewhere. These policies, which would have been deemed too socialist and subsequently dismissed in the bastion of capitalism a few weeks ago, are now part and parcel of US response to the pandemic. It is high time to contend with the global inequalities—of which the international monetary system is an important part—the pandemic has disclosed. And changing that monetary system seems timelier than ever.

Such a change would have not only economic but also political implications, given that the weaponization of the US dollar operates as the building block of an increasingly unilateral and punitive US foreign policy. Trump’s most-oft used foreign policy instrument, unilateral economic sanctions (which have not been eased but rather intensified in the cases of Venezuela and Iran during the pandemic), depends on the dollar remaining ‘the God among Gods.’ Trump’s defunding of international organizations, ranging from UNICEF to UNRWA and now possibly to the WHO, is premised upon that weapon. It is time to de-weaponize the US dollar and find instruments of international governance that would cultivate global solidarity rather than fuel and perpetuate inequality. Our international monetary system that thrives on that inequality was born out of a crisis—World War II and its terms dictated by the war’s victors. And even then, economists like Keynes and Schumacher, had proposed to create a supranational and global reserve currency, bancor, rather than picking one among hundreds of currencies to serve that purpose so that all international trade could be denominated in a unit of account that could help reconcile trade imbalances globally and incentivize not only those with trade deficits but also those with surpluses toward balance. As Keynes explained in his original proposal, “the principle is the necessary equality of credits and debits, of assets and liabilities. If no credits can be removed outside the clearing system but only transferred within it, the Union itself can never be in difficulties.” The COVID-19 pandemic might help us revive that line of thought. And that would be worthy of a genuine celebration.

Emrah Yildiz is a cultural anthropologist and Crown Junior Chair in Middle East Studies at Northwestern University. His research lies at the intersection of historiography and ethnography of borders and their states; anthropology of pilgrimage and visitation in Islam as well as the study of currencies and contraband commerce in political economy.