My book “Super Imperialism” was about how the United States has gained a free lunch by establishing the dollar as international reserve currency by replacing gold. I also showed that the U.S. balance of payments deficit is almost entirely military related to support its 800 bases around the world. Ending the gold-exchange standard in 1971 created a situation in which the excess U.S. dollars thrown of by the U.S. payments deficit end up in foreign central banks.

For these central banks, the inflow of surplus dollars poses the problem of what do we do with them. Central banks don’t buy stocks and bonds, or control of corporations, because that is risky and also does not directly help their own economy. So central banks buy US Treasury bonds and bills – IOUs of the U.S. Government. For the United States, the money that is spent on running a balance-of-payments deficit on account of the military and on American investors buying Chinese stocks and Chinese companies, dollars are recycled back to the United States to buy US Treasury bonds.

That is how the U.S. balance of payments deficit serves to finance the domestic government budget deficit. The larger the U.S. balance of payments deficit grows as the U.S. spends more militarily and politically around the world, the more foreign central banks end up financing the domestic budget deficit.

That frees the United States Treasury from having to balance its budget to avoid having to borrow from US investors. More and more of the U.S. federal debt has been owed to foreign central banks. That means that foreign countries are, in effect, financing the costs of surrounding them(selves) with the 800 U.S. military bases. This enables the United States to make military threats, in case they cannot conquer you intellectually by making you follow the University of Chicago and IMF financialization policy.

Another reason not to use the dollar is to avoid taking the risk of being victimized in the way that the United States has treated Iran and other countries. U.S. strategists have threatened to isolate foreign banks from using the Swift bank-clearing system. They have imposed sanctions on European investors in the Nordstream gas pipeline, and had imposed unilateral penalties on other governments that do not favor U.S. investors.

The U.S. strategy is to control your economy in order to force you to sell your most profitable industrial sectors to US investors, to force you to invest in your industry only by borrowing from the United States.

So the question is, how do China, Russia, Iran and other countries break free of this U.S.

dollarization strategy? As now constituted, dollarization creates a circular flow that finances American military spending by forcing the costs onto foreign central banks holding dollars.

The solution obviously is to avoid using dollars in order to break free of American control of your economy. To do this, you have to have a non-Dollar currency. This currency alternative has to be large enough to have a critical mass, so that it can be used internationally. That’s why China, Russia, Iran and their allies are trying to create their own currency area, incorporating largely the Shanghai Cooperation Organization. The aim is denominate your foreign trade, investment and government spending in your own currency.

It is necessary to break away not only from the U.S. dollar, but also from the International Monetary Fund. The objective of U.S. and IMF monetary policy is basically to make your economy much more expensive and inefficient than that of the United States. Its government runs a budget deficit and balance-of-payments deficit by creating its own money. It does not expect or intend to repay its debt. Other countries are to treat it as their own monetary backing, in place of gold.

But outside the United States, countries are told to finance their budget deficits by selling off whatever is in their public domain – namely, their land, real estate and natural resources, their commanding heights in the form of basic infrastructure and electric utilities.

The ideal the United States would like China to do is to let U.S. investors do to it what they did to Russia after 1991. They told Russia that it needed to back its domestic Ruble issues by holding an equivalent amount of U.S. dollars, in the form of private dollar loans or dollar-denominated U.S. Treasury securities. This involved borrowing dollars from the United States instead of simply issuing domestic rubles. Russia paid 100 percent interest a year to U.S. investors in 1993-1994.

Yet Russia did not have enough foreign exchange to pay domestic ruble-wages or to pay for domestic goods and services. But neoliberal advisors convinced Russia to back all Ruble money or domestic currency credit it created by backing it with U.S. dollars. Obtaining these dollars involved paying enormous interest to the United States for this needless backing. There was no need for such backing. At the end of this road the United States convinced Russia to sell off its raw materials, its nickel mines, its electric utilities, its oil reserves, and ultimately tried to pry Crimea away from Russia.

Suppose China would follow the U.S. plan. At a certain point it will be asked to sell off Macau and Hong Kong as a US military base. It will be advised to sell its information technology to the United States. And politically, U.S. diplomacy would like China to divide itself into three or four countries, starting with Xinjiang as a separate country. This divide-and-conquer strategy aims at carving up China, and it uses financial policy to do this.

The U.S. has discovered that it does not have to militarily invade China. It does not have to conquer China. It does not have to use military weapons, because it has the intellectual weapon of financialization, convincing you that you need to do this in order to have a balanced economy. So, when China sends its students to the United States, especially when it sends central bankers and planners to the United States to study (and be recruited), they are told by the U.S. “Do as we say, not as we have done.”

The United States is not telling China or Russia or third world countries or Europe how to get rich in the way that it did, by protective tariffs, by creating its own money and by making other countries dependent on it. The United States does not want you to be independent and self-reliant. The United States wants China to let itself become dependent on U.S. finance in order to invest in its own industry. It wants Chinese corporations to borrow from the United States, and to sell its stocks to US investors just like Khodorkovsky in Russia was trying to sell Yukos oil to Standard Oil, and essentially turn Russia’s oil reserves to U.S. investors.

The United States is trying to convince China that its tax system should be based on raising your cost of labour. The objective of the United States is to injure China, to make it a high-cost economy by imposing the value-added tax, a VAT, which will increase the cost of consumer goods. The aim of this anti-industrial tax policy is to make you pay your labor a high enough wage to afford to pay the taxes on consumer goods.

The United States could never pass such a tax domestically. There would be a revolution. The amazing thing is that there is no revolution in China. It and other countries have been gullible in accepting the logic of U.S. economists teaching the students you send over, hoping that they will draw up a plan for China along neoliberal lines.

The neoliberal plan is not to make you independent, and not to help you grow except to the extent that your growth will be paid to US investors or used to finance U.S. military spending around the world to encircle you and trying to destabilize you in Sichuan to try to pry China apart.

Look at what the United States has done in Russia, and at what the International Monetary Fund in Europe has done to Greece, Latvia and the Baltic states. It is a dress rehearsal for what U.S. diplomacy would like to do to you, if it can convince you to follow the neoliberal US economic policy of financialization and privatization.

De-dollarization is the alternative to privatization and financialization.