High-value currency no longer an economic preference, but a political one

It was not surprising for us that the U.S. economy came to a standstill in the first quarter of the year. I noted in my previous columns that the U.S. cannot continue with the high dollar as before. Unlike during the Cold War period, the U.S. dollar no longer has the possibility to regulate the world economy as a reserve currency because, apart from the U.S., Asian economies have also begun dominating the world economy in terms of information technology. The U.S. has to compete with such economies, and to this end, it needs a competitive exchange. In short, it is possible to suggest that the U.S. will not be able to take advantage of its reserve currency as easily as before.

Indeed, a high-value currency is a political preference, in that when you prefer it, you cannot be competitive in a global economy. Therefore, you will lose against your rivals who supply commodities that are of the same quality as yours. The U.S. made up for this loss with political superiority, which was based on its military power. This was why a high-value currency was not a preference that brought down the U.S.'s competitiveness and rocked its own economy. Moreover, as required by the Bretton Woods system, the U.S. used its national currency as a currency of world trade and had an unlimited seigniorage advantage in this regard. Now, however, the reality is as follows: In 2025, fields such as mobile Internet, automation of knowledge work, the Internet of things, cloud technology, advanced robotics and next-generation genomics will have an average size of up to 30 percent of the global economy in terms of consumer surplus. This average size will mostly be created by developing Asia, and I predict, starting from Turkey, that Asia Minor and Asia-Pacific will be added to this toward 2050. Certainly, this situation will threaten the existing monetary system that is based on the Bretton Woods Agreement.

Peter Morici, a professor of international business at the University of Maryland's R. H. Smith School of Business, recently said the run-up in the dollar is a temporary situation and that the currencies of developing countries, particularly the Chinese yuan, will replace the dollar in the long run. He added, "The yuan will be used more in international trade in the long-run because, with China's economic development, the yuan will be much more effective in trade."

He also underscored that global trade is becoming diversified with a great number of currencies. Furthermore, the strong dollar is pulling down commodity prices, harming producer countries, such as Brazil, and threatening other emerging markets where companies have debts in dollars. Well, does the same strong dollar provide an advantage for eurozone countries' exports by devaluing the euro? Unfortunately, I cannot give a positive answer to this question, since the euro ceases to be a reserve currency in this process - a situation that means the rapid deterioration of the eurozone's financial structure. Moreover, the rapid depreciation of commodities, which gain value on a dollar basis, is also bringing producer countries to the brink of a crisis while exports drop in the eurozone as well. Well, to whose benefit is the preference for a high-value dollar in the U.S. and world, and who wants it? Currently, there is a daily foreign exchange market of around $5.5 trillion on a global basis. This market is majorly dominated by the London and New York-based financial capital, which makes up for the falling profit rates in traditional sectors - a speculative financial instrument. By using new foreign exchange debts, this capital also threatens countries that have rapidly kept up with the developed Western world and strive to enter a new growth path by obtaining the technological return, such as Turkey. Thus, it once again tries to inflict a Western-centric crisis upon the East and hamper the use of local currencies, which is prioritized by developing countries, particularly Turkey and Russia, in their free trade agreements. Again, the same capital instigates a new "dollarization" process in these countries by stimulating a high demand for the dollar and by depreciating local currencies.

Last week, it became clear once again that this process cannot continue. As I noted above, the U.S. economy came to a halt in the first quarter. Although this is partly because of the fall in business investments and oil prices, as well as rise of the dollar, the crux of the matter concerns the fact that the U.S. economy has lost its competitiveness with an overvalued dollar. Now it is time to look at Asia once again. As Andre Gunder Frank suggests, it is time to "ReOrient" - a process that is inevitable.