You seem to be taking a very literal approach, which I'm afraid misses much of the picture. Let me spell it out a little more.
American exceptionalism including the centrality of the dollar is ultimately backed by the US military. The US has layers to its power, which is what makes it superior to others, at the top level of is the control of all manner of international institutions, channels of trade and politics. This is not a fortunate gift from the rest of the world, it's military power that's been parlayed into influence. The superficial layers like the bond markets or federal reserve are not stand alone, I see that they are ultimately inherited from military power. In fact nobody trusts the Federal Reserve anymore than they absolutely have to. The US can create dollars (QE) as needed with little blowback. This ability to manipulate at will is what makes it a strong currency, not the exchange rate. If Russia or the Swiss tried it they'd be laughed at, and then sanctioned to perpetuity. In fact the Swiss and the Russians have been sanctioned by the US for much tinier currency manipulation. Sanctions are enforced by the military. Since nearly all American external debt is held in dollars it is the only country that can print its way out of a Dollar denominated debt. This behaviour is tolerated by the rest of the world because the US has placed itself at the heart of all economic exchange using the big stick. Anyone who dissents will lose access to most of the international economy. Like any good imperialist the US no longer needs to pull out the military for every little thing, everyone knows the stakes and plays along. In fact nobody has any idea exactly how many dollars are out there, and that's how the US likes it. So much the easier to dump plane loads of cash over Afghanistan or Columbia. I disagree with both your examples. Russia cannot project military power like the US can, it doesn't any longer have a worldwide network of Soviet military bases. It's maybe 1/5th as strong as the US, and that's being generous - and they don't have any subtle tools of economic force. They can't impose economic sanctions meaningfully unless they control all world trade. If the Russian military had a 10:1 advantage over the US, which are the odds at which the US typically decides to invade, Wall Street would relocate to Moscow. They don't control the World Bank, IMF, Wall Street, LIBOR. Supposedly independent institutions that in reality answer to America more often than not. Where the rest of the world has a chance to compete fairly, like the UN, the US opts out. The Swiss only recently got off the currency manipulator warning list maintained by the US (the biggest currency manipulator) for buying up Euro and USD to maintain the CHF. It costs the Swiss real money to hold up the Franc, they can't print CHF like the US prints dollars. Nobody would wear it. The mob boss gets free champagne, the others have to pay for it. On Sat, 1 Jun, 2019, 9:18 PM Charles Haynes, <[email protected]> wrote: > If your thesis that a country's currency's value was a function of the > strength of its military then we should see a clear correlation between > strong countries and strong currencies, and weak countries and weak > currencies. But we don't, instead currencies values are correlated with the > economic strength and trust in the strength and independence of their > central banks. > > Prime examples are Russia - strong military, one of the top five in the > world, but weak currency and Switzerland who has a cute story about citizen > soldiers but whose currency is strong way out of proportion to their > military strength. > > Your thesis is facile, sadly easily disproven. > > -- Charles >
