BEIJING --(Xinhua) -- The US central bank raised its benchmark lending rate by 0.75 percentage points last week, the fourth increase and sixth rise this year, pushing the key interest rate to a range of 3.75 percent to 4 percent, the highest in 15 years.

The bank said such increases were necessary to mitigate record high inflation. However, before the previous harsh currency policies had an echo at home, they had already wreaked havoc globally given the dollar's dominance of the international monetary and trading system.

In the wake of rising interest rates in the United States, many countries experienced depreciation of their currencies and capital outflows, soaring costs of debt servicing and massive exogenous inflation, to the extent that some fell into a currency or debt crisis.

- The dominance of the dollar
The term "exorbitant privilege" was coined in 1965 by then-French Finance Minister Valéry Giscard d'Estaing to bemoan the American practice of using the dominance of the dollar for self-interest.

The international monetary system characterized by the dominant US dollar was established after the "Bretton Woods" agreement in 1944. Since then, Washington waged wars and imposed sanctions against any competitor to impose the hegemony of the dollar.

In the 1980s, when fast-growing Japan sought a higher international profile for the yen, the US imposed the Plaza Accord, which caused the yen to appreciate dramatically against the dollar, setting the stage for a "lost decade" of slow growth and deflation in Japan.

In January 1999, when the euro was officially introduced, one euro was equivalent to $1.8. Two months later, the US-led NATO launched air strikes against the then Federal Republic of Yugoslavia without UN approval, and the Kosovo War began. This chaos led to an outflow of capital out of Europe and a rapid depreciation of the euro.

History has repeated itself, with devastating results for those who challenge the dollar's hegemony. There seems to be an unwritten rule that the United States will not allow any threat to its "exorbitant privilege".

Exploitation of others
Under a system centered around the US dollar after World War II, Washington took advantage of the dollar's hegemony to export domestic financial crises, reap global wealth, and destroy financial stability or prosperity in other countries. Seigniorage, treasury bills, and monetary policy manipulation are tricks the US uses to make profits.

Another privilege allows the United States to run an external deficit, importing more than it exports and consuming more than it produces year after year without becoming more indebted to the rest of the world.

On October 3, the United States national debt exceeded $31 trillion for the first time amid rising interest rates, pushing the US federal debt-to-GDP ratio to nearly 126 percent.

Although experts have repeatedly warned that such high debt is a ticking time bomb that risks triggering a financial crisis and that a US default will likely lead to a global financial meltdown, successive US governments do not seem to be bothered by the matter.

- Coin weapon
Using the US dollar as a weapon, the US alternates between currency inflation and currency tightening to create "controllable turmoil" in the financial and economic sectors, resulting in business opportunities for US industry.

From the Latin American debt crisis of the 1980s to the 1997 financial crisis in Asia and the 2008 global financial crisis, the US dollar has been playing its part. However, each time, the US has emerged unscathed or even managed to turn a profit.
The US has printed roughly half the amount of currency printed in the past 200 years or more in just the past year and a half, allowing inflation to run high and economic bubbles to spread.

Malhar Nabar, head of the IMF's Research Department, told Xinhua that these increases may add pressure on capital inflows in emerging markets, push up exogenous inflation, increase debt vulnerability and reduce space for debt. policies.

In July, the International Monetary Fund estimated that nearly 30 percent of emerging countries and 60 percent of low-income countries are already in debt crisis or close to it.

-- Diminishing dollar concession

With decades of US financial dominance marked by the dominance of the dollar, frustration is mounting around the world.
And last month, the Kingdom of Saudi Arabia, a major oil exporter and supporter of the petrodollar system, announced a reduction in its oil production, which sparked anger in Washington, which asked the kingdom to do otherwise.

US President Joe Biden said he would review the US relationship with Saudi Arabia and there would be unspecified "consequences" for the kingdom.

Andrei Kostin, Chairman of the Board of Directors of Russia's VTB Bank, said Washington's "weaponization" of financial instruments inevitably undermined confidence in the US dollar as the primary reserve currency as well as the primary means of payment, raising a strong argument in favor of wider use of other currencies.

Muhammad Saqib, Secretary-General of the Indo-China Economic and Cultural Council, told Xinhua that the problem of the current international financial system lies in the dominant dollar which "does not support any other currency, even the euro or the yen," noting that more Countries may venture outside the dollar.

According to International Monetary Fund data, the dollar's share of global foreign exchange reserves fell to less than 59 percent in the fourth quarter of last year, continuing its decline for two decades.

As Michael Roberts, a London-based economist, said, the decades-long dominance of the dollar has put the US in a strong position to dictate the terms of trade and finance over the past 70 years, but the dollar's dominance is gradually waning.