The Inner Contradictions And Contemporary Influence Of Dollar Hegemony

Back in the 1870s', the income and productivity of the United States have gone ahead of Western Europe and the competition between dollars and pounds, open and undergrounded, has thus begun. It was not until World War II that the United States has emerged as the world's leading capitalist countries. Dollars have finally replaced the position of pounds and become the dominant currency in the world's currency system. In 1947, the Britton Woods System established a criterion that dollars were pegged to gold and other currencies to dollars. Thus, dollars have gained a wide recognition in the western world. Then through the Marshall Plan the United States spent dollars on Europe in helping its reconstruction, by which the status of dollars was further enhanced. In 1972, the United States terminated the dominant status of gold, so dollar has become a monetary credit with no genuine support and rigid fiscal discipline. Despite the changes, the U.S. dollars continued to take the role of primary global currency in the world financial and trade circle. Therefore, so was established the hegemony of dollars.The Theory of Dollar Hegemony has been developed on the basis of Stable Hegemony Theory, which is the core theory of New Realism in the international political economy and has a big influence in the academic field in the western developed countries. The Theory was initiated by the famous economist Charlesp. Kindlleberger in the early 1970s, and systemized by Robert Gilpin later. The Theory of Stable Hegemony mainly tells: the world's political and economic stability is brought about by some country's hegemony. If the dominant country sacrifices itself, its hegemonic status would decline, which in turn would lead to instability of the world's politics and economy. In 1984, Robert Keohane criticized and amended the Theory in his After Hegemony: Cooperation and Discord in the World Political Economy, which well differentiated with Churchill's Stable Hegemony Theory. In the aim of expanding the dollar hegemony, the United States put forward Liberalism to the world. Since the 1970s and the 1980s, New Liberalism has become an important part in the globalization theory system carried on by American and British international monopoly capital. It has also developed into an ideological and theoretical system which has integrated many different disciplinary branches."The Washington Consensus"in 1990 was a landmark in the developing of New Liberalism. The Consensus were reached by the U.S. government and the international economic organizations controlled by the U.S. government and carried on by all means. The basic principles are: trade and economic liberalization, market pricing, elimination of inflation and privatization. However, the essence of Neo-liberalism aims at serving the United States. When the Soviet Union and Eastern European countries follow the U.S. policies, routes, through privatization, finance, globalization, the crisis of "reform" and unrest happened. The defaults of liberalism have gradually been noted by the world, so the hidden interests of expansion of the dollar hegemony have been completely revealed.As the Dollar hegemony expanded itself in the world, its internal contradictions have also been exposed, including the monetary mechanism contradictions, the exchange rate arrangements mechanism for the contradictions, conflicts and other international balance of payments adjustment. So were revealed the performance of exclusive hegemony, resource monopoly, predatory and other such characteristics. Hegemony, from the initial stage of promoting world economic development, prosperity and the role of international trade, and gradually become predatory against the world's wealth, the implementation of power, slavery, the tools third-world countries. Hegemony through the financial crisis continue to provoke, in the realization of the purpose of economic exploitation, while forcing other countries to hold dollars to help the expansion of U.S. hegemony, and ultimately maximize the benefits of dollar hegemony. The main approach is to control public opinion through the United States, the rating companies, investment banks, hedge funds and other financial instruments, in the target country manufacture of various financial bubbles, select the contradictions of exchange rate, financial market manipulation and other means to create a financial panic, in a short time on a country or the region's economy, plunder his country's economic development outcomes. Or through trade sanctions, trade frictions and other means to force other countries to accept the unreasonable exchange rate arrangements, to destroy the economic balance between potential competitors, and even damage to the country's economic base.Being the root of many hot world economic problem, dollar hegemony has an important impact on the world economy. In 1998, dollar hegemony capital attacked at east Asian economies utilizing rate choice mechanism, triggering financial market violent unrest, Then the crisis spread, from which the U.S. profited. The Asian economic crisis broke out due to this. The inherent contradictions are constantly deepened,when Dollar Hegemony controls and plunders other country's wealth. It leads to huge deficits, savings deficit, consumption boom, and financial bubble etc. It also leads to productivity reducing, manufacturing off shoring, high unemployment and then makes the domestic economic imbalances, thus the U.S. subprime mortgage crisis blew up. Global economic crisis break out through the transmission mechanism of dollar hegemony. The dangers of dollar hegemony are understood by the world widely. Because of domestic economic base of erosion and national credit reducing, inevitably, dollar hegemony is stuck in the process of decline.In order to maintain the stability of American hegemony, America fought against the potential rivals at all costs when the economy begins to recover. Starting from the weakest revivals- Greece, it expanded to Ireland, Portugal, Spain and other countries gradually, and hope to smash entire EU countries. Euro appeared violent unrest, and demonstrations and even riots exploded in many countries. The euro zone was at once in jeopardy and even faced division. In order to maintain the stability of the euro zone, the EU overcome the internal contradictions; help the euro countries economy which was in crisis using by putting billions of euro in the market, meanwhile formulated strict surveillance to limit dollar hegemony market behavior. Finally the EU and china together fight against the dollar hegemony. The euro zone regained stability gradually. Dollar hegemony capital is best at creating the disputations on exchange rate. The United States is the one of the major export countries for China. China once became the biggest holder of U.S. bonds. But America disputes the RMB exchange rate when they get cheap goods, intimidating RMB appreciation, sharply threatening the trade war, and hoping to crackdown the Chinese economy. Objecting the U. S. behavior, and increasing the exchange rate reform at the same time, China successfully resolved the pressure on RMB appreciation.Due to the existence of dollar hegemony, the competition on currency and trade between China and U.S is inevitable and long-lasting. After hegemony, international cooperation will be strengthened gradually. China should fully realize the complexity of fighting against U.S dollar hegemony, the possibility and necessity to establish cooperation mechanism. China should struggle and cooperate at the same time, protecting our interests in coexistence.To promote the position of RMB in the world, the following procedures should be carried on:1. Adjust sale and settlement of exchange as a policy as soon as possible, gradually adjust RMB exchange rate appreciation and change the excessive dependence on exports of economic development model.2. Strengthen the financial system reform, create independent rating companies and other financial institutions, strengthen the financial market supervision, and speed up the market construction.3. Prevent the impact on the U.S dollar reserves resulted from U.S dollar depreciating and optimize foreign reserves investment structure.4. Promote the internationalization of RMB steadily.