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Meanwhile, China is using its own currency to back future trade agreements. In April it agreed to a $15 billion currency swap with Argentina, specifically to avoid using the dollar in trade. Others may be encouraged to use to use the Yuan.
The development of these regional currencies will necessarily undermine the dominant position of the dollar; and the subsequent devaluation will have a strong impact on the US economy. The US may then begin to experience what every other country has – that its currency becomes linked to the performance of its ‘real’ economy.
The rise of regional currencies will catalyse a crisis of institutional legitimacy for the IMF/World Bank group. With 17% of the quota and vote the US still has veto power over any changes to the IMF/World Bank quota system, itself the subject of strong criticism from Russia, China and India. Despite the apparent consensus at the recent G20, the problems of the ‘Washington Consensus’ are not yet over.
Tim Anderson is a senior lecturer in Political Economy at the University of Sydney
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