No American would readily admit it, but could Putin, with the help of Chinese President Xi Jinping, quicken the demise of American dominance?
The populist answer is, of course, of course not. From the American perspective, Putin has more to lose than America has to gain.
American dominance of the world’s economies
Here’s some background on the American dominance of the world’s economies.
The following graphic is each nation’s share of the global economic pie.
Unsurprisingly, businesses in the U.S., Japan, Germany, France, Italy, and the U.K. accounted for about 55% of all measured global output.
Production out of businesses in China, India, and Brazil accounted for 8.8% of global output. Basically, businesses and consumers living in these countries were an afterthought.
Dominance had a name, and it came with the backing of the red, white, and blue.
(As a note, the U.S.S.R. is left out of these numbers because the IMF lacks data on them for the years in existence.)
Fast forward to 1990.
Perhaps surprisingly, nothing changed. In fact, American and Japanese dominance got stronger, with just these two countries accounting for over a third of all measured and reported global economic output.
Again, dominance literally meant dollar denominated American businesses or Yen backed Japanese businesses. There wasn’t even a debate about it.
Moving to 2000.
Here’s that look.
The beginning of the rise of the businesses in China and India start to appear, largely at the “expense” of the American, Japanese, and European-based businesses.
Rise of business in China and India
Pushing to clock forward to today (2014), the following is the estimate according to projections from IMF economists.
What’s readily apparent is the rise of business in China and India, estimated to account for a little less than a fourth of all measured global economic output. One-fourth!
If this chart doesn’t show the end of American dominance, take a look at the 2019 projection that follows.
Here’s the IMF’s projection for 2019.
Interestingly, the economies of China and India are anticipated to be bigger than the combination of the U.S. and Japanese economies combined. The score comes out at 25.3% for China/India and 22.8%.
The difference is about the size of the Russian economy!
So, what could Putin do to quicken the demise of American dominance?
Putin to end supremacy of the dollar
Of the tools at his disposal, Putin could put an end to the supremacy of the dollar?
How could Putin do that?
Quite simple. Putin could simply tell Russian companies to drop the dollar, thus decreasing demand for the unofficial world’s reserve currency.
By dropping the dollar, selling treasuries, and encouraging many companies across the globe to default on their dollar-denominated debts, the dollar would certainly be weakened.
The nail in the coffin would come if Putin convinced Xi Jinping to follow Russia’s lead. After all, it wouldn’t be that much of a stretch for Chinese businesses to simply say – hey, we price our goods in yuan and want payment in yuan (or some other negotiated international reserve standard).
It’s a real threat. Perhaps, with the polarization of views on America’s future, many Americans might like the idea as well (quietly of course).
(As the saying goes, does America stand for anything anymore besides the incessant belief in popularity contests (aka Democracy)?)
Overall, the wealth of the world is shifting east. If the U.S. doesn’t play its cards right, Putin likely could quicken the demise of American dominance by lessening the demand for American currency, striking a perhaps fatal blow to American control over the international financial system.