by John Lawrence August 7, 2018
To say that the dollar is the world's "reserve" currency is to put it politely. The dollar is also the world's currency that is used by the US to bludgeon other nations and individuals into submission. The US dominates other nations not only by means of its outsized military-industrial complex and bases in practically every country of the world. It also uses the dollar through sanctions to make other nations do its bidding. This is especially true as the sanctions towards Iran go back into effect based on the fact that Trump pulled out of the Iran deal which all other parties to the deal, namely our European allies, still support. So again the dollar will be weaponized in the form of sanctions against Iran until Iran cries uncle.
Other nations are taking note of how sanctions are being used especially those nations who the US has conveniently defined as the "enemy." Those nations are starting to form an alternative economic system not based on the US dollar. At present most goods that are traded in the world, especially oil, are priced and traded in US dollars. China is working to make the yuan also a world reserve currency. That means that goods and services can also be traded in Chinese yuan. They are making progress in that regard. The BRICS nations have banded together (Brazil, Russia, India, China, South Africa) to form their own financial institutions not dominated by the US.
Wikipedia put it this way:
The BRICS Forum, an independent international organisation encouraging commercial, political and cultural cooperation between the BRICS nations, was formed in 2011. In June 2012, the BRICS nations pledged $75 billion to boost the lending power of the International Monetary Fund (IMF). However, this loan was conditional on IMF voting reforms. In late March 2013, during the fifth BRICS summit in Durban, South Africa, the member countries agreed to create a global financial institution which they intended to rival the western-dominated IMF and World Bank. After the summit, the BRICS stated that they planned to finalise the arrangements for this New Development Bank by 2014. However, disputes relating to burden sharing and location slowed down the agreements.
Of course Russia and China are the US' designated enemies. Their purpose, as far as the US is concerned, is to justify the US' trillion dollar defense-intelligence-homeland security budget. The US does not want to be friends with these nations because it would take the profit out of war, hot or cold. However, US corporations have made use of cheap Chinese labor and cheap Chinese imports for years. So we've become friends of a sort based on exploiting Chinese labor.
As China becomes more of a financial powerhouse, they want more of a say in terms of how goods are priced and sold. They are already the world's second leading economy and the world's largest holder of US debt in the form of Treasury bonds. They run the show in terms of trade by keeping the yuan's value with respect to the dollar low. If it rises too much they sell off US Treasuries. This means that the Chinese run a trade deficit with the US which is something Trump dislikes, but will likely not be able to do anything about. The alternative would be for the Chinese to sell off huge amounts of US Treasuries causing panic in the bond markets.
China is forming friendships and economic arrangements with other countries, particularly on the Eurasian land mass, with its Belt and Road initiative. As it does so, it keeps its labor force busy, builds infrastructure in these countries and expedites trade among these countries and China. The US keeps going into more debt with China by running up not only a trade deficit but the national deficit, in other words living beyond its means. Most of this money goes to fund its military-industrial-intelligence complex, but also social security and medicare, two programs Republicans have vowed to get rid of since they mainly benefit middle class and poor people. The defense sector, on the other hand, lines the pockets of rich people and the politicians themselves.