In the ongoing discussion of global economics, it’s crucial to understand the prevailing dynamics that allow the United States to maintain its financial supremacy. This article delves into the complex interplay between U.S. monetary policy, global trade practices, and the economic strategies of both developed and developing nations.
Yves here. The United States has sustained its financial and economic dominance amid what its elite view as a virtuous cycle. The U.S. dollar remains the world’s reserve currency, primarily due to the nation running persistent trade deficits, which effectively amounts to exporting jobs. Many exporting countries, despite attempts by the World Bank to foster capital markets, lack the depth and liquidity needed for meaningful domestic investment. Consequently, there is rampant overvaluation in real estate investments, with substantial capital also flowing abroad. U.S. financial markets are, and have historically been, the most transparent and liquid globally, so they continue to offer an appealing option for investment. It’s important to note that dollar reinvestment encompasses not just U.S. securities but also extends to real estate, private company stakes, and direct investments.
After the 1997 Asian financial crisis, numerous developing countries opted to accumulate extensive foreign exchange reserves, predominantly in dollars, to avoid future dependence on IMF bailouts.
There is a case to be made that the evolving dollar model hinged on the U.S. maintaining trade surpluses. Achieving this would necessitate focusing on the economic well-being of American consumers and businesses—promoting rising real incomes, albeit not as high as they could have been without job exports. Instead, the U.S. embraced a neoliberal agenda, which showed indifference to rentierism in areas such as healthcare, housing, and higher education while simultaneously tolerating, if not encouraging, de-industrialization.
By Glenn Diesen. Originally published at his channel
Glenn Diesen
Welcome back. Today, we have Professor Michael Hudson joining us, and I encourage everyone to follow his work. There is a link in the description. It’s great to see you again, Michael.
Michael Hudson
It’s good to be here, especially with so much news happening. The stock market is up, and there’s a sense of confidence that major disturbances in world inflation or exchange rates won’t arise from current events, which is quite remarkable. We are analyzing the ongoing war with a perspective that downplays its potential impacts.
Glenn Diesen
It raises questions about whether this outlook is delusional or indicative of market manipulation. We’ll address this among other topics today. The situation is striking—a culmination of decades of globalization, characterized by the integration of markets and significant, unsustainable debt levels. This U.S.-centric globalization model appears to be fraying at the edges, dismantled by economic conflict and military actions. You might have seen the interview with Scott Besant, who argues that the wars against Iran, Venezuela, and Russia have economic aspects aimed at reinforcing the U.S. dollar.
Michael Hudson
Indeed, there has been a strategic plan that’s often overlooked. Critics may be quick to dismiss Trump, suggesting he struggles in his dealings with Iran or misinterprets the situation. However, what seems like a retreat or a failed endeavor is part of a broader strategy. Both Trump and Secretary of the Treasury Besant have articulated their objectives. During his first administration, Trump emphasized that America’s extensive military expenditures abroad were undermining its financial stability, particularly stressing that this drain had persisted since 1950. He pointedly noted that the continuous foreign military spending had compelled the U.S. to abandon the gold standard in 1971.
Since that shift, rather than relying on gold, foreign markets have been recycling U.S. dollars back into the American economy. Initially, local entities receiving dollars—companies and governments—would hand these over to their central banks, which would in turn acquire U.S. Treasury securities. Recently, the trend has shifted; foreign private investors have been purchasing U.S. stocks and bonds, substantially inflating the American stock market, primarily through debt facilitation. However, the viability of this dominance is being called into question.
Trump’s strategy has laid out that military spending abroad cannot continue unchecked. He proposed withdrawing U.S. troops from certain international commitments, emphasizing that those he defends, such as OPEC countries, should contribute to the financial responsibilities entailed in that defense. This echoes the agreements made in the 1970s, where OPEC would price oil in a manner that ensured earnings would ultimately find their way back into American financial markets. However, since then, the U.S. has lost much of its industrial power and transformed into a debtor nation, necessitating a new approach.
By late 2025, the U.S. articulated a new strategy aiming for monopolistic control over specific sectors. The intention was clear: to shape the economy into a rentier system. The focus shifted first to oil, where the U.S. sought dominance to prevent allied nations from engaging with rival producers. The fixation on isolating Iranian oil exports, particularly from reaching China, underscores a larger geopolitical maneuver. Simultaneously, U.S. actions aimed to limit the repercussions of increased oil prices resulting from rising tensions in critical oil passageways.
The influence over rising oil prices extends to natural gas exports and is designed to ensure that the U.S. benefits from any inflation in global oil trade, particularly at the expense of competitors like Russia. Trump’s view has culminated in efforts to charge OPEC countries for U.S. military costs under the guise of defense, paralleling Iran’s recent intention to impose tolls on oil transport through strategic waters.
Yet tension exists around the legal basis for such actions. Secretary of State Rubio highlighted that U.S. sovereignty over international waters is not compatible with aggressive toll imposition, cautioning against lapsing into a legally indefensible position. This apparent contradiction indicates the complexity of U.S. foreign policy, as it seeks to reshape its international role without overstepping established legal norms.
Trump’s revised stance appears to steer OPEC countries toward investing in U.S. industries rather than relying solely on traditional agreements. Evidence suggests that partnerships are forming—such as Amazon’s significant investment in Bahrain for advanced tech infrastructure. This move hints at a deeper ambition to secure technological dominance, extending beyond just energy control.
Yet, as the U.S. seeks monopolistic roles—particularly in information technology—there arises a challenge: can these investments sustain themselves within the United States, given its own infrastructural constraints? Recent trends indicate a relocation of tech industry investments to strategic areas abroad, with attention being diverted to regions like the Middle East. Here, the U.S. attempts to solidify partnerships that can further its technological reach while ensuring energy independence for initiatives within the region.
At the same time, nations like Iran retaliate against U.S. influence. They aim to eliminate American military presence in the region, recognizing that economic symbiosis with the U.S. only serves to entrench its control and destabilize local economies. The interaction of these geopolitical maneuvers points to a greater clash between longstanding imperial ambitions and emerging aspirations for local economic independence.
In conclusion, the mixture of war, economic strategy, and diplomatic exertion marks a projection of power as the U.S. attempts to navigate its present situation. Yet the success remains uncertain as numerous factors interplay, including global responses, economic viability, and the potential emergence of new political dynamics that challenge the status quo.
Glenn Diesen
Thank you for your insights, Michael. It’s clear that restoring U.S. dominance hinges not only on rival responses but also the willingness of allies to navigate a precarious path in their partnerships with the U.S.
Michael Hudson
The ongoing military tensions and geopolitical fights emphasize the importance of energy strategies and technological monopolies. The ability of nations to strike deals will determine the broader implications for global economics.
