theglobeandmail.com
U.S. Economic Coercion Risks Undermining Dollar's Global Dominance
The U.S.'s use of economic pressure against its allies is raising concerns about the dollar's global dominance, prompting the EU to activate its Anti-Coercion Instrument and other nations to engage in contingency planning, including exploring alternatives to the dollar.
- How could the U.S.'s use of economic coercion against its allies impact the global role of the dollar?
- The U.S.'s increasingly coercive international economic policies, particularly those targeting allies, risk undermining the dollar's global dominance. This is evidenced by the EU's activation of its Anti-Coercion Instrument (ACI) and growing contingency planning among European central banks, reflecting concerns about potential disruptions to dollar funding.
- What specific measures are the EU and other nations taking to mitigate the risks associated with U.S. economic pressure?
- The escalating trade tensions and political fissures between the U.S. and its allies are fueling concerns about the weaponization of the dollar. The heavy reliance on dollar-denominated transactions globally, highlighted by Deutsche Bank's analysis of the swap and forwards market, makes the U.S.'s actions particularly impactful. This has prompted contingency planning, including exploring alternatives like a digital euro.
- What are the long-term implications of potentially politicizing the Federal Reserve's role in providing dollar liquidity to global markets?
- The potential for the Federal Reserve to be politically pressured to restrict dollar liquidity globally poses a systemic risk to international finance. This could lead to a decline in foreign investment in U.S. assets, potentially reducing the dollar's appeal and weakening the U.S.'s global economic influence. The firing of FTC commissioners further highlights concerns about the Fed's independence.
Cognitive Concepts
Framing Bias
The framing emphasizes the potential negative consequences of U.S. economic policies, particularly the risk to the dollar's dominance. While these risks are valid, the article could benefit from a more balanced presentation by also exploring potential benefits or alternative interpretations of U.S. actions. The repeated use of terms like "coercion" and "threats" shapes the narrative towards a negative perception of U.S. policies.
Language Bias
The article uses charged language like "wring change", "explicitly threatening", "extreme pressures", and "nuclear button", which carry strong negative connotations. While these terms reflect the concerns discussed, using more neutral alternatives would improve objectivity. For example, instead of "wring change," "influence policy" could be used. Similarly, "extreme pressures" could be replaced with "significant economic leverage.
Bias by Omission
The analysis lacks perspectives from U.S. policymakers and officials directly involved in shaping international economic policies. Including their viewpoints would provide a more balanced understanding of the motivations and justifications behind these policies. The piece also omits discussion of potential benefits or unintended consequences of the EU's ACI, which could strengthen the analysis.
False Dichotomy
The article presents a somewhat simplified dichotomy between 'transactional' and 'coercive' economic policies. The reality is likely more nuanced, with a spectrum of actions falling between these two extremes. The analysis could benefit from exploring this spectrum and acknowledging the complexities involved in defining and differentiating these policy approaches.
Sustainable Development Goals
The article highlights concerns about the use of economic coercion by the US, potentially undermining international cooperation and the stability of the global financial system. This challenges the principles of peaceful and inclusive societies for sustainable development, which are central to SDG 16. The threat of using the Fed's role as lender of last resort as a bargaining chip and the potential for political interference in central bank independence directly impact the ability of institutions to function effectively and promote justice.