Commentary Magazine


Ditching the Dollar

On Tuesday, Vladimir Putin said that nations should move away from the American currency. “At the moment the world which is based on the dollar is suffering serious problems,” the Russian prime minister told a forum in Moscow. “In such conditions, we need to think about improving the payments system for bilateral trade, including the use of national currencies.” Chinese Premier Wen Jiabao, in the Russian capital for a series of meetings, agreed. “We need to diversify the global currency system, to support its stability through the use of different currencies,” he said.

Wen’s comments were a more polite version of a series of anti-dollar comments that have appeared in People’s Daily, the Communist Party’s flagship publication. “The U.S. is, by taking advantage of its dollar hegemony, grabbing the global wealth,” said a commentary published on Friday. “Therefore, the dollar-pegged payments in the international trade transactions must be shattered.”

It’s besides the point that China and Russia cannot conduct trade with each other in either of their own currencies for a variety of legal, technical, and economic reasons. And it is also irrelevant that parties around the world, supposedly disadvantaged by the greenback, are rushing into the currency at this time, apparently looking for refuge from worldwide turmoil. The important point is that these two nations, which will participate in the mid-November discussions in Washington to reshape the global financial architecture, are trying to undermine the United States at a time of severe economic stress.

Of course, Russia and China, as sovereign states, have the right to seek short-term advantage, create instability, and act irresponsibly. Yet the Bush administration is ignoring their hostile moves and continues to treat them as friends, inviting the pair to help restructure the world’s currency system and review international regulation of the financial markets.

Russia and China have, in a very real sense, declared economic warfare on the United States. They obviously have no trouble acting in their own perceived interests. Yet Washington seems unable to stand up for ours. Our troubles, as serious as they may be, are not so great that we must invite our adversaries to help decide our future.