Dollar hegemony has long enraged governments around the world. In the 1960s the French complained of America’s “exorbitant privilege”. Forty years later, as the global financial crisis wreaked havoc, China called for a shift away from the dollar. More recently, Brazil’s president, Luiz Inácio Lula da Silva, spoke for many when he asked with derision, “Who was it that decided that the dollar was the currency after the disappearance of the gold standard?” The unspoken answer was that an American “empire” had foisted the dollar on a prostrate world.
In fact, by the time President Richard Nixon cut the dollar’s link to gold in 1971, terminating the last vestiges of the gold standard, US officials were quite sick of dollar dominance. The currency’s role had seemed a burden under the postwar monetary system agreed at Bretton Woods in 1944 — from the requirement to convert dollars into gold to the exchange rate rigidity that came with its central position — and now, amid the economic tumult of the 1970s, it seemed a danger. The administration, as one senior White House economist said at the time, needed to “eliminate” the dollar’s reserve currency role. In the heart of the dollar empire, policymakers developed plans to downgrade the greenback’s status and make it more like any other currency.