The End of US Dollar Hegemony?

The End of US Dollar Hegemony?

PCR Interviewed by Dimitri Simes Jr. of the Sputnik News Agency 

Print version:

Dr. Paul Craig Roberts.mp4

Dimitri Simes Jr. [00:00:07] Hello, this is the New Rules podcast and I am your host, Dimitri Simes Jr. Today we’re taking a break from the Ukraine conflict to talk about Biden nomics. Over the past several months, there has been growing optimism about the US economy, and Joe Biden is not shy about taking all of that credit. But to what extent is this optimism justified? To discuss this issue, we’ve invited Dr. Paul Craig Roberts, economist, writer and former assistant Treasury secretary. Dr. Roberts, thank you so much for coming on the program. 

Dr. Roberts [00:00:43] Well, thank you, Dmitry. I’m pleased to be on your program. 

Dimitri Simes Jr. [00:00:47] You know, Dr. Roberts, back in March, when there were a series of major bank failures, very seemed to be a consensus that the United States was on the brink of a major recession. But if you look at the mood right now, there seems to be a change. A growing number of economists say that the United States will avoid a recession and instead succeed in having a soft landing later this year. Do you think they have a point? 

Dr. Roberts [00:01:14] Well, I don’t really know, Dimitri. You see, they rely on the official statistics, which, in my view, are notorious. They either under measure or they over measure, depending on what the agenda is. So when they try to determine what’s going on by official statistics, they simply mislead themselves. So I don’t know. I don’t really think it’s important whether the United States is about to have a recession or not. And I don’t think that what’s wrong with the United States economy has anything to do with Joe Biden except that his policies and sanctions against Russia and now starting a trade war with China will have deleterious effects on the United States dollar. 

Dr. Roberts [00:02:15] And this, of course, will lead to something far worse than a recession. The problem with the dollar has been brewing for a very long time. And I think in order to comprehend the kind of problems the United States is very likely to face in the near future, we need to understand what is going wrong with the American economy and how the dollar has been set up for a serious loss in value. That seems to me to be the pertinent problem, and it’s a serious problem that goes far beyond a current president or the prospect of a recession. 

Dimitri Simes Jr. [00:03:14] You say that the US dollar is the major point of risk in the US economy. Could you elaborate on that? Why are you concerned about the status of the US dollar? 

Dr. Roberts [00:03:25] Well, this is a this is sort of a long story, but I think it’s important that the dollar assumed the role of world reserve currency after World War Two. The Americans took it from the British pound. And what this meant, if the dollar is the world’s reserve currency, is that the United States had no financial problems because other countries settled their international accounts in dollars. And this order was solidified with the deal that President Nixon made with the Saudi Arabia, I think, in 1973, with the creation of the petro-dollar, where oil would be built in dollars. 

Dr. Roberts [00:04:21] So this created a great demand for dollars. All central banks held their reserves in dollars or in dollar denominated assets, US treasury bonds, and today, US equities. So that there’s been a huge demand for dollar denominated assets, financial assets, stocks and bonds, bills that are held as reserves by all foreign central banks. That’s how they settle their trade differences. So what this means is that there’s always financing for America’s budget deficits and America’s trade deficits because the dollars are reserves and countries use them to settle their trade differences. And of course, so the world economy grows slowly over time, the amounts become larger. So there’s never been a problem with financing U.S. debt, neither the budget deficit nor the trade deficit. 

Dr. Roberts [00:05:30] Now, the budget deficits have just become a part of American life because there weren’t any financing problems. So I worry about that? The Republicans always worried about them. We always have a big fight over the over the debt limit ceiling and all of that. But it has never mattered because there was never any problem financing the deficit. Same with the trade deficit. You see, what the United States did when it offshored its manufacturing and entered into this globalism arrangement is it made itself import dependent because all the goods that the American firms make in China and other parts of Asia, when they come back in to the United States to be marketed, they enter as imports. And so the offshoring of American manufacturing has guaranteed a large and growing trade deficit. But again, this has not had the usual currency effects that it would have in a country that did not have that reserve its currency as a reserve currency. And so it hasn’t much matter either. 

Dr. Roberts [00:06:52] But what is changing? Well, we see with the American sanctions on Russia and other countries and the tendency of these sanctions to expand and just be applied anywhere now to any point. What this has done is made other countries realize, ‘hey, holding our reserves in dollars means we’re also the Americans thumb. If we don’t comply with their foreign policies, their financial policies, they can confiscate our reserves as Washington did to Russia.’ And also we affect sanctions as an effort to break up the ability of those who are sanctioned to engage in international trade. How do they pay? How do they pay for their imports? And so we see now a movement away from the use of the dollar as reserve currency. We see countries now focusing on keeping their reserves in gold and in the currencies of their trading partners. And we see now that international balances between countries, that trade differences are being settled in other currencies, in their own currencies, in the currencies of their trading partners. Well, this change is not really dramatic and all at once, but it’s ongoing. 

Dr. Roberts [00:08:31] And we are already seeing a marked decline in the use of the dollar as the currency that settles international imbalances, trade imbalances. So as this continues and of course, we in Washington, we’re starting a trade war with China, trying to hold down China’s development. You have to remember the principal goal of American foreign policy, as stated clearly by the neoconservatives who control our foreign policy. The principal goal of that foreign policy is to prevent the rise of any country that could serve as a constraint on American unilateralism. 

Dr. Roberts [00:09:19] Well, who are those countries? Obviously, Russia and China. And so they are bearing the brunt of this effort. But what the effort does when Washington applies these kinds of policies, that it discourages the use of the dollar. And so what we see as countries abandon the use of the dollar, we see America’s financing problems become real for the first time. And what will happen if they cease accumulating dollars, they cease buying Treasury bonds to hold as reserves, they cease buying American equities, is these prices of these financial assets will fall. Well, if bond prices fall, interest rates go up and also the dollar’s value in exchange markets will fall. And as the dollar falls, import prices go up. So what the situation is set for in the United States is rising interest rates, falling value of the dollar, and therefore rising domestic inflation, because offshoring and globalism has made the United States import dependent. 

Dr. Roberts [00:10:48] You see, when I was a young man studying economics, the United States was essentially a self-sufficient country. It didn’t have any kind of import dependency. Later, it had one in oil. But that was solved, as I said, with the agreement Nixon had made with the Saudi Arabians. Well, but all this is now changed out from unders because the amount of dollars loose in the world as central bank reserves is phenomenal. It’s in many, many, many trillions. And so as people decide to get out of these holdings rather than to continue increasing one, it puts American interest rates and the dollar’s value, exchange value, under pressure. 

Dr. Roberts [00:11:44] That’s the real problem that the United States faces. What can you do about it? I doubt it can do anything. It’s going to go through a very painful adjustment process. The living standards will fall because inflation will rise and import prices will rise. Is it going to happen tomorrow when we wake up? No, but it’s already happening. This is a gradual thing and will pick up momentum as it goes and the results become more obvious. People will rush to get out of the dollar and when that starts, then the process moves quicker. So that’s my explanation, Dimitri, of what the real situation is. Of course, it’s ignored. There’s no discussion of this. If the Federal Reserve knows about it, there’s no sign that they do. If the United States Treasury knows, there’s no sign that they do. The neo liberal economists pretend nothing really has changed. ‘There’s no alternative to the dollar as a reserve currency, blah, blah.’ But what they don’t realize is you don’t need a reserve currency. 

Dr. Roberts [00:13:01] The only reason we have one is because after World War Two, the United States had the only industrial economy that wasn’t destroyed. Every other economy was destroyed. So there was no currency. No country had a currency that had any worth, any backing. And so it naturally fell to the dollar because the American economy, instead of being destroyed, had been built up stronger. Everyone else’s was destroyed by war. Today, that’s not the case. You take the Russian economy, it’s a very and it’s very powerful because of the enormous energy reserves, because of the enormous agricultural potential. And you look at the Chinese economy, it is a major manufacturing economy far greater than the United States. These are countries with currencies that have a real basis, and they are not vulnerable in the way that the dollar is. 

Dr. Roberts [00:14:03] Today it’s entirely possible for countries to trade in their own currencies, to settle their trade balances in their own currencies. The countries that maintain proper monetary policies will have strong currencies. The ones that don’t will have weak currencies. Whatever the value of the currency, they can still settle their accounts in their own currencies. And in the need of reserve currency is gone. It’s not needed. Russia and China, for example, could trade with each other in their own currencies, and so can other countries. And not just BRICS, but basically any country. And as I said, the countries maintain a sound monetary policy, they won’t have a problem doing this. So that’s the that’s the picture as as I see it. And it’s unlikely to get attention from the Americans and the rest of the world are unlikely to catch on too quick because they’re brainwashed since 1945 about the need for reserve currency. So you can see the mess can get really bad before it’s ever addressed. So that’s my take, Dimitri.

Dimitri Simes Jr. [00:15:39] Well, that was a very detailed breakdown, but I want to play devil’s advocate, because when you address some of these arguments, but when you look at what neoliberal economists say, they’re making counter argument to de-dollarization as a major force is that there simply is no viable alternative to the dollar, that no one other than the United States can offer deep liquid financial markets and rule of law. And that, simply put, the reason countries will continue to be using the dollar is just because it’s so much more convenient than any other alternative. Why do you think that these neoliberal economists are wrong? What are they missing? 

Dr. Roberts [00:16:24] What they’re missing? Everything. I don’t know anything that neoliberal economists are correct about. You know, Michael Hudson calls them ‘junk economists’, and I think that’s taking it easy on them. Look, first of all, there’s no rule of law. What happened to the Russian central bank reserves? They were stolen. If you have a rule of law, you can’t steal a major country’s bank reserves or any countries. What has happened to Venezuela’s gold? It was stolen. Germany wants to go back but couldn’t get it and can’t. So first of all, there’s no rule of law. If there’s rule of law, how do you exclude people from the SWIFT system? How do you impose sanctions on them because you don’t approve of some policy of theirs that has nothing to do with you? So rule of law, I mean, there’s no such thing, certainly not in the United States. 

Dr. Roberts [00:17:27] I mean, we can even see this with the attacks by the Democrat Party on President Trump. All these indictments are based on laws that no one’s ever heard of. They’ve never been applied before to anyone, much less to a president, a sitting president. You have to understand all these charges against Trump over actions while he was in office. So where is the rule of law? The law is a weapon. It’s used against domestic opponents of the Democratic Party. It is used against foreign opponents of Washington, of Washington’s hegemony. So that’s one thing. 

Dr. Roberts [00:18:10] The second thing is what other country has spewed out endless debt instruments? None. The United States. Why? Because it was the reserve currency and could. Well, just look at the amount of dollars that are out there. I mean, it’s many, many trillions. What other countries in that fix? Go on. So you see, that’s just the beginning. We could go on all day about the stupidities of the neoliberal economist. But that should show you the to two of the great vulnerabilities in their argument. 

Dr. Roberts [00:18:52] And of course, the third one is you don’t need a reserve currency. There’s absolutely no reason to have one today. The world’s economies are not destroyed by war. I mean, they may be sued if the conflict in Ukraine continues to widen. It continues to spin out of control. But at the moment, there are many economists who can settle their differences, the trade differences in their own currencies. So we don’t need a reserve currency. And all it’s done for the dollar is to get it in trouble and to set the United States up for currency collapse, high interest rates, high domestic prices that I want to be very clear. I’m convinced that that is America’s future. I don’t know how close it is, but the process is already begun. 

Dimitri Simes Jr. [00:19:46] I want to remind our audience members that you are watching and listening to the New Rules podcast. I’m your host, Dimitri Simes, Jr. And our guest today is Dr. Paul Craig Roberts. Dr. Roberts, you know, we’ve been talking about the pros and cons of the dollarization. I want to get more into the details of how this process will develop from this point onward, because you are right that more and more countries are looking for alternatives to the dollar. But still, when you look at global trade transactions, global financial transactions, the dollar continues to dominate. What needs to happen in order for that to change? 

Dr. Roberts [00:20:28] Dimitry I think it’s already changed. I mean, it’s difficult to rely on any official information or any information you see, because today information is fashioned to support whatever the official narratives are. But I saw recently that the dollar was then accounted for less than half of international payments. Well, it used to be essentially all of them. So to say nothing has changed. It obviously has. If the report I saw recently is correct that it resinged to 49% or 47%, which is now the dollar share of international payments settlements. So that’s a massive decline. 

Dr. Roberts [00:21:25] Is it correct? I don’t know, because, first of all, they in fact don’t have any competence in reports. The second the report could have been a typo. Instead of 47, it could have been 74. Who knows? But it is known, it is a fact, that the dollar is shrinking compared to the past as the use to settle trade differences, trade imbalances. It’s not growing. It’s shrinking. And so the process has already started. And if it’s already as low as 47% or 49%. And I don’t know that it is. That’s just what I read. Then we can see there’s been a massive change already. And once again, to treat the notion that you have to have: a reserve currency is false. 

Dr. Roberts [00:22:36] You see, the reserve currency originated under the British Empire. But they dominated the world. You have to remember, the sun never sets on the British Empire. They not only that, they controlled trade, they had these trade agreements that President Roosevelt made them abandon for his support in World War Two. So the origin of reserve currency was British power, its worldwide dominance of trade. And with the end of World War Two, president Roosevelt, the Americans dismantled the British Empire and took the role of reserve currency. So and they did it on purpose because it gives that country the reserve currency enormous power. They could pay their own bills by creating money. That’s the advantage of reserve currency. You could pay your bills by creating money. You don’t have to make things that you sell to others for money in order to pay your bills to people you buy from. You just create money. That’s the advantage of being the reserve currency. That’s the advantage that Washington is set up to lose. And of course, it means it loses its power. 

Dr. Roberts [00:24:13] And you would think, confronted with such a loss, why shouldn’t we be trying to make the dollar desirable? It would be scaring people away from using it by confiscating people’s central bank reserves and so on and so on. But it’s acting very foolish and it’s been foolish for years and years. Why in the world would a powerful manufacturing economy decide to locate its industry offshore? That’s deindustrialization. It impoverished the American middle class, the blue collar middle class, the manufacturing workers, the industrial workers. What do they do now? They they work part time jobs in Wal-Mart and Home Depot. The kinds of errors the United States has been making are just  catastrophic. And you can’t make these kinds of errors and survive as a viable economy. And that’s the problem the United States has. 

Dr. Roberts [00:25:29] When we talk about economic development Dimitri, what do we mean? Do we mean giving away your industry to another country? No, it means accumulating manufacturing capability, industrial capability, not relocating it in China or Indonesia. Or Vietnam or Mexico. But that’s been the American policy now for 20-25 years. So. Yes, there’s momentum. People are used to using the dollar. And that’s probably why the process has been as slow as it’s been in coming to a serious situation. 

Dimitri Simes Jr. [00:26:19] I think you make a very interesting point that there is no need for a reserve currency per se, because I think everyone is just so used to the concept of a reserve currency that they can’t imagine a world without one. Could you talk a bit about what are vague alternatives? How could I guess, a multi-polar economic world order look like, one without a reserve currency? How would trade look like? What are some of the options countries could pursue in order to make this thing work without the dollar? 

Dr. Roberts [00:26:51] Well, the reserves would probably gold. If you look at the the Chinese policy and the Russian policy, they seem to be accumulating gold. And so currencies that have gold have some backing. This was the way it was and this is the way it initially was, this is the way it was under the British reserve currencies, you know, the British sovereign, the gold sovereign. And of course, the initial American reserve currency, it was gold-backed. It wasn’t until Nixon closed the gold wonder that it became fiat currency-backed gold. 

Dr. Roberts [00:27:35] And and so how do you trade? Well, if you are an American company and you buy something from Germany, you can pay them in your currency or you could pay them in German currency. Or if other currencies are sound, the British currency, you can pay them in British currency or maybe you sell some of them to the British, they pay you in pounds and you buy something from Germans and you pay them in the pounds. You know what currencies that you have depends on your trading partners. If they are paying you and their currencies, you have whatever those are, whoever you’re trading partners on. If you’re trading partners of Japan and France that you’ve got. And of course, France doesn’t have a currency. So what this really means for Europe is that either the EU breaks up. Or it’s the end of national countries that Europe would come to Europe. And France is just a state in Europe, like New York is a state in the United States, it’s all about it. 

Dr. Roberts [00:28:53] So, if you have the French franc, as we used to have, and you’re selling it to France, they pay you in franc. You’re buying from Japan and you owe them. You can pay them in francs or the franc equivalent of the Japanese bill, or you can sell the francs in the market, get the Japanese money and pay them. Now, of course, this raises the transaction cost of settling international payments because the card says there are fees for exchanging one currency into another. But that’s a lot less of a problem than having a reserve currency that lets the reserve currency country finance itself and everyone else’s expense. 

Dr. Roberts [00:29:51] You see, the world is not aware of it, but they financed all of America’s wars in the Middle East. They’re financing America’s war in Ukraine against the Russians. That’s what it means to have a reserve currency. The reserve currency country is financed by everyone else. It’s a highly exploitable situation. And I think most countries are going to have to pay some small fee for exchanging one currency into another that to be exploited by the reserve currency country. You have to understand the reserve currency country. This means it can exploit the rest of the world. And does.

Dimitri Simes Jr. [00:30:43] you make a very, I think, interesting and important point because again, I think that part of the problem when neoliberals talk about de-dollarization, they think of this as a purely economic phenomenon. They say, well, you know, if we get out the calculators, the transaction costs don’t add up. What they don’t understand that this is increasingly a geopolitical and national security imperative. As you point out. Countries understand that they cannot rely on the West to protect their assets, to reliably convey their trade. And so they’re looking for alternatives, for security reasons, for the same reason people buy insurance or, you know, do other things to protect themselves. 

Dr. Roberts [00:31:28] Right. Yes, that’s correct. I mean, what does it do to have a bunch of reserves in dollars if Washington can confiscate them? And look, the spillover effects, who do the sanctions on Russia, who they really hurt? Europe, Europe and Americans. What have they done to Russia? They’ve actually been a benefit to Russia because it forced the Russian government off its utterly stupid policy of being dependent on the West. So now Russia is finding out, ‘hey, you know, we can actually be an economy on our own. We can actually finance our own projects with the rubles. We didn’t need to borrow and get in there,’ which they’ve gotten out of. But you see it basically served to push Putin and the Kremlin off of this stupid neoliberal trap that they were in. So the sanctions have benefited Russia and hurt the hell out of Europe and American investors. 

Dr. Roberts [00:32:44] There are a lot of Americans, just ordinary people say, such as myself, who invested in Lukoil, in Russia or other Russian commodity energy assets, and they all looks frozen. All of their balances are now zero. They still own the shares, but they can’t collect the dividends from them and they can’t sell them. And so in all their accounts where they had these shares is now a big zero. Biden Sanctions really hurt all American investors in Russia and severely hurt Europe, particularly through the energy dimension. I mean, we now hear speculation that Germany will be the de-industrialized. Well, just imagine that. So, Russian sanctions de-industrialized Germany. Is that what we really wanted to do? 

Dr. Roberts [00:33:42] Now, some people say, ‘yes, that’s what Biden wants to do. He wants to turn Europe into a wasteland. So it’s an assured market for American products.’ It could actually be true. Well, what’s wrong with the Europeans? Why don’t they realize that? Why is it their discussion? Is this what the Americans are really doing? They make their money. They’re destroying our economy by cutting us all from energy and raw materials from Russia and food so that we are their unique market. 

Dr. Roberts [00:34:18] I’ve already heard that German companies are thinking about relocating to the United States. So is Germany? This is the question. Are they going to offshore their production to the United States the way the United States offshored its production to China? Well, then what happens to German employment to German incomes. When you take your workforce and you convert it from a high productivity, high value added occupation such as manufacturing to retail and wholesale trade, you have cut the hell out of the real living standard. Shelf stockers don’t make the same wage that manufacturing workers make because that productivity is not anywhere near as high. The value added is not as high. Moreover, they’re now automating shelf stocking. 

Dr. Roberts [00:35:27] So all of these issues that I’m bringing out, they are not brought out by anybody. They’re ignored. But they’re obvious. Why is that? Why are people so utterly and totally blind to the real reality? And they’re all talking about things that don’t matter and that have no real consequence. And they’re giving reassurances as a whistle past the graveyard. It’s like insane. They simply can’t accept reality. They have no comprehension of the world they’re living in. I could go on forever, but I hope the point is clear. Real problems are unacknowledged and unaddressed, and I think they’ll remain that way until the slide becomes rapid. Once it becomes rapid, that this will pass the graveyard. 

Dimitri Simes Jr. [00:36:25] And when do you think that sort of moment of truth is coming? Because I think a lot of observers have looked over the past decade as the United States has accumulated unprecedented amounts of government debt, soaring private debt. And they said there’s no way this can continue on. But all the same, American economy has managed to stay afloat somehow. Keep moving forward. How much longer can this whole thing keep on going? 

Dr. Roberts [00:36:54] You see, Dimitri, the reason it could continue going is the dollar was the reserve currency. So there was a worldwide market for the debt. It was the reserves of every foreign central bank. So more dollar debt just meant you had more reserves. And the people going all about the American debt didn’t understand it either. They just were trying to think, you know, if I was an individual or a company, I couldn’t get away with this. So how’s the government doing it? They never connected the advantage of the dollar as a reserve currency with their ability to issue endless debt because there was always a market for the endless debt. Central bank reserves. What central bank is going to complain because it’s got more reserves, but it’s only in fact from Washington threatening. The use of the dollar by weaponizing. When Russia started weaponizing the dollar through sanctions and confiscations, that’s when the world started wondering about having dollar reserves. 

Dr. Roberts [00:38:06] So if you look at it, not only did Washington run up endless debt, it then discouraged everybody from holding it. And people think it’s a superpower. It’s obviously totally incompetent bunch of fools in Washington. That’s what they are. They’ve been that way for years. Why expand your debt beyond reason and then go discourage the people from holding it? But that’s what Washington has done. Don’t expect the neoliberals to admit it because somebody will say, ‘Well, where were you when this happened? Where was your mouth? Didn’t you understand this?’ But that’s exactly what’s happened. But what I think I read that the world holds something like $35-40 trillion. And we’re discouraging them from holding them. You know, China was a huge creditor. And now they’ve stopped. And they’re selling off. 

Dr. Roberts [00:39:22] Well, you see, when when the country is run in such a totally ignored and incompetent way, houses expect to survive. How is it a superpower when it can’t even think? It has an economics profession, is completely blind. It understands nothing. A financial press, which I mean, it’s a joke. How does the country survive? Or we can survive forever because there’s no alternative to the dollar. That’s their answer. I mean, it’s so ridiculous. 

Dimitri Simes Jr. [00:40:10] I want to remind our audience members that you are watching and listening to the New Rules podcast. I’m your host, Dimitri Simes, Jr. And our guest today is Dr. Paul Craig Roberts. Dr. Roberts, in addition to the dollar, we’ve talked a lot about industrial production today and to what extent there really was a disastrous mistake for the United States to engage in the whole offshoring policy. So I have to ask you about Joe Biden’s promise to make American manufacturing great again, because he claims that as a result of the CHIPS Act, the Inflation Reduction Act and the infrastructure bill, that his administration has created 800,000 new manufacturing jobs and invested more than $200 billion into new manufacturing infrastructure. Do you expect Biden to help resurrect America as a great industrial power, or is this just another bluff? 

Dr. Roberts [00:41:10] Oh, it can’t be done. The supply chains are destroyed, gone, been gone for a couple of decades. A disciplined manufacturing workforce is gone, there’s not one. It can’t be done. The entire manufacturing capability of innumerable American companies & corporations, Apple, for example, is located in China. What if a consequence of Biden’s trade war with China is a chance to nationalize the Apple facilities? I mean, let’s don’t talk about this nonsense. But whatever Biden says, it’s bullshit. It has nothing to do with any reality. You can say the same thing about the entirety of the American media. 

Dr. Roberts [00:42:18] But I want to go back to an earlier question of yours, which I didn’t completely answer. You know, how long can the untenable American situation of reserve currency continue? Well, it depends in part on the mistakes of other countries. So, in other words, the dollar can continue for a long time if all the currencies, which are the currencies of powerful countries such as Russia and China, have to be increased in order to provide some new kinds of payment system for South America, Africa and parts of Asia. They will have to get out of the dollar system. So you see, this would support the dollar for a long time because the rouble’s declining against the dollar, because the rouble is being dumped in the foreign exchange markets to purchase the currencies of countries trying to escape the dollar system. 

Dr. Roberts [00:43:35] So that’s just one example of how an untenable situation for the dollar could continue. And I’m sure I can come up with others. So this is why you can’t simply say, Oh, well, the dollar will collapse tomorrow. Who knows how long this process can be ongoing, but it’ll be full of tension. And I think the investment uncertainties will grow. And currency uncertainties. 

Dimitri Simes Jr. [00:44:11] If we’re returning to the question of de-dollarization. How will the process of de-dollarization impact Biden’s attempt to reshore production in the United States, could it in advertently help return industrial production to the United States by making the cost of labor cheaper and just making it cheaper to establish production in the United States? 

Dr. Roberts [00:44:35] I think that de-dollarization could just as easily, if not more likely, raise the cost of labor, because de-dollarization would mean a decline in the dollar. And as we import dependent, it means a rise of prices. And so a reduction in living standards. And so people would want to be paid more. Now, I think the way that that this could cause a re-industrialization or at least a rebirth of manufacturing in the United States is that we simply won’t be able to pay for our offshored products. If the dollar’s falling. And what you you see, the reason they went offshore was to get cheap labor, so their profits would go up. Well, if it reverses and being offshore means that your dollar is falling, then the real value of those dollar profits is disappearing and your trade deficit is growing, that people are using the dollars to the same extent for reserve currency. And so who’s financing your your trading? 

Dr. Roberts [00:45:56] So you have to start making your things at home again in order to be able to afford them. And so it is true that there is a silver lining in this crazy policy of the United States that can cause the situation to worsen so that, my goodness, we have to make things at home, otherwise we can’t afford them. That is exactly what could happen. It could be one of the aspects of the unwinding of the dollar as world reserve currency. Now, if somebody can show that, ‘oh, there’s no change in the dollar, the dollar’s percentage, it hasn’t declined at all,’ especially if it’s growing, then I wouldn’t know what the explanation would be. But I don’t see how that can be all these talks about de-dollarization, if there’s no sign of it, why would they be talking about de-dollarization if actually the dollar is growing in use or holding it same? So the discussion can’t be just entirely speculative. I mean, what is the point of it if there’s no basis for it? 

Dimitri Simes Jr. [00:47:20] And the same time, I think that most of our audience members would agree that from a logical perspective, it would make sense for the United States to try and reshore industrial production and revive manufacturing. What exactly is the Biden administration getting wrong in the way that it’s going about doing it? 

Dr. Roberts [00:47:39] How would you bring the factories home, not relying on this whole process we’ve been discussing? Just assume you wanted to bring factories home. You could change the way you taxed corporations. You could say, ‘Look. If you produce the products at home that you market to Americans, you get a lower tax rate. Then if you produce abroad the products that you market to Americans’. So you could adjust adjust the tax difference to wipe out the labor cost savings and this would bring them back. Or you could simply engage in a patriotic campaign. Why are our corporations employing Chinese instead of Americans? This would work before the American intellectual class became anti-American, because we are a racist, nation and evil. It’s still work for most Americans. So you could combine the two. And you could make a patriotic issue and you could use that type of taxation. 

Dr. Roberts [00:49:13] Now you see the big cost of the offshore is it destroyed the ladders of upward mobility in American society because those ladders of upward mobility, it meant people could come out of a poor class as a people enter into the manufacturing workforce and end up with middle class incomes and even be able to send their kids off to university. But when you offshored the manufacturing, all those ladders came down. So it’s much harder today to climb up through the income ranks because manufacturing isn’t there anymore. And industrial jobs, for the most part, aren’t there. So in that way, the offshoring has hurt us even worse because United States was known as the Opportunity Society. You could get ahead. It was up to you. But if you worked and you showed up for work and you paid attention and you were trained and you had labor force discipline, then you could rise economically. Well, how do you do that today? Even if you were to bring back industry in the ways I suggested it might be possible to do, you would find a large percentage, you would find the majority of the workforce subject to restraint from racial preferences. It could well be that the United States has taken so many mistaken turns that they can’t be revived and that we’re just going to experience a long decline. Maybe fast. Who knows? 

Dimitri Simes Jr. [00:51:16] I guess that does beg the question. If you know the United States can’t revive industrial production, what’s next? You said that’s a slow decline. What does that mean in practice for our audience members in the United States, for ordinary Americans who just want to support their families and somehow have a normal life comparable to what their parents and their grandparents had? 

Dr. Roberts [00:51:40] It’s going to become very hard, and I suspect the cities will become increasingly unsafe. I think that the United States faces a very real possibility of social collapse. 

Dimitri Simes Jr. [00:51:56] Social collapse. 

Dr. Roberts [00:51:58] It’s not being addressed. It’s being encouraged. Everything that is done encourages it. Nothing is being done to address the threat. It’s the new morality. The new morality, the woke morality. Can only end in social collapse. 

Dimitri Simes Jr. [00:52:19] I want to remind our audience members that you watched and listened to the New Rules podcast. I’m your host, Dimitri Simes, Jr. And our guest today was Dr. Paul Craig Roberts. Dr. Roberts, I know that you’re not big on social media, but where can our audience members go to keep up with your work? 

Dr. Roberts [00:52:39] To my website, it’s a very easy it’s just my name. Paul Craig Roberts dot org. Not dot com, dot org. And there are postings every day and there’s a huge archive and you at least get a different view of reality and you don’t have to accept it. But you can know that there are different explanations than the official ones. 

Dimitri Simes Jr. [00:53:11] And if you want to keep up with our work, the very first thing you should do is like and subscribe both on YouTube and on Rumble. We also have a two telegram channels, Twitter account and much more. All of that in the link in the description below. Thank you all for tuning in. Till next time. 

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