Little remains of the vast edifice of family, community and faith relationships that once unified and anchored the American way of life. These things have not disappeared from the horizon. They are still important, but they have deteriorated. There is no more consensus about what they mean, and they no longer serve as anchors of certainty.
One final anchor remains that does unite Americans. This anchor survives despite everything. Now, even this seems targeted for destruction.
The Last Anchor That Unites Everyone
It seems almost irreverent to affirm, but this last anchor is the American dollar. Money is not supposed to be a social anchor. Other more immaterial things—moral, principles, social bonds—should play this role. However, today money bridges the seemingly unbridgeable chasms that polarize the nation in a way nothing else can.
It is not just money. What unites Americans across the board is the dollar, which is accepted everywhere either in its physical or virtual form. No one questions its dominant role. As the world’s reserve currency, it keeps global trade running while everything else falls apart. When the other anchors fail, the dollar is always there to spend ways out of a crisis.
Calling the dollar the last anchor does not mean that money should or does run everything. The dollar is much more than a simple unit of currency. It has immense symbolic importance since it is attached to notions of national sovereignty, power and the American way of life. The dollar sustains the myth of an America that will never fail. Thus, its fall is unimaginable to many Americans who cannot visualize the country without it.
A Culture of Intemperance
However, there is a darker side to the dollar. It facilitates the frenetic intemperance of a culture that rejects limits. People want everything instantly and effortlessly, and the dollar is ever-ready to supply the means to buy fleeting happiness. The government offers its dollar subsidies to keep people dependent and happy. So many others seem willing to sustain this frenzied lifestyle by contracting debt of all types—private, corporate and governmental.
And the dollar is the ideal instrument for this frenzy. It is stable, flexible and plentiful. What sustains the dollar is the world’s willingness to buy U.S. Treasury bonds as a stable investment. There seems to be no limit to the frenetic appetite for these debt dollars worldwide.
However, the dollar cannot solve the nation’s problems no matter how many trillions are thrown at them. Like any currency, the dollar is only as strong as the society that sustains it. With the decline of America’s institutions, it is inevitable that the dollar too will face a decline—perhaps radically and dramatically.
This dollar decline could happen in three different ways, especially in these erratic times.
The Post-2008 U.S. Is Unprepared for New Economic Crises
First, it can be destroyed by overconfidence. The grand myth holds that the dollar cannot be destroyed because it has never been destroyed before, despite several close calls.
There is no logic to this affirmation. All things temporal can be destroyed, especially if they are neglected. However, the argument does carry some weight in a culture that is run on emotions and feelings.
The fact is that the dollar is surviving on borrowed time. The 2008 crisis provoked world finance leaders to use every tool in their toolboxes to fix the crisis. Programs of zero or even negative interest, quantitative easing and other vehicles have all run their course with limited effects. Overconfident Americans need to take notice of dangers on the horizon.
Risks still abound in today’s global economy with trade wars and political tensions. Many economic observers say that should a major crisis hit the world economy, the financial systems could go down. And there are very few new tricks that can be employed to stem the grave damage since the root causes are not being addressed.
The mantra that the dollar is indestructible is hardly reassuring.
The Very Real Debt Threat
The second factor that could cause the dollar’s decline is debt in all its forms, especially American sovereign debt. When the world no longer wants to buy American debt, the crushing burden of high interest rates will have disastrous consequences for the nation.
The present governmental debt shows no sign of diminishing. People have gotten used to the idea of annual $800 billion deficits. It will be the new normal over the coming years as no Senator or U.S. Congressman wants to take things off their shopping lists or face the firestorm of public opprobrium for urging fiscal restraint.
Also, corporate debt now stands at nearly $9 trillion. The quality of investment-grade bonds has deteriorated with many in or bordering on junk category. This debt could trigger defaults, bankruptcies, burst bubbles of immense proportions, all of which will weigh heavily on the dollar.
Similarly, personal debt has climbed back to pre-2008 crisis levels.
Indeed, ours is a world awash in debt of all sizes, types, and nations. As the world’s reserve currency, the dollar cannot escape the reverberations of a world financial crisis when major players default.
Sidelining the Dollar as the World’s Reserve Currency
The final threat is more deliberate and targeted. As the preferred unit of currency in commodity markets, the dollar is under direct attack today through a new European Union mechanism called a Special Purpose Vehicle (SPV).
Everyone knows that no currency (or even basket of currencies) can replace the dollar as the world’s reserve currency. However, the European Union, China, Russia and Iran are seeking to create a clearinghouse that will run circles around U.S. sanctions against the Islamic Republic of Iran. They are setting up a credit system that will allow the barter trading of commodities without the use of American dollars.
In this way, the dollar can come to be challenged and sidelined by many major countries in international trade, and potentially even losing its privileged status.
The Collapse of the Postwar Order
Any of these three ways can drag down the U.S. dollar from its post-World War II throne. This would be disastrous since it would hasten the collapse of the postwar order with no replacement save chaos and disorder.
However, the greatest catastrophe would be for American society. The collapse of America’s last anchor will increase the fragmentation and polarization of the nation. All these three ways are avoidable if America’s political leaders would apply themselves energetically and without further loss of time toward addressing the root causes of the threats the nation faces. It would involve the need for great restraint, sacrifice and new national priorities.
The real problem facing America today is much more a moral problem than an economic one. Society needs anchors, especially moral anchors to unify the nation. When those anchors are gone, the nation is left rudderless in a sea of chaos.
John Horvat II is a scholar, researcher, educator, international speaker, and author of the book Return to Order: From a Frenzied Economy to an Organic Christian Soceity--Where We've Been, How We Go Here, and Where We Need to Go. He lives in Spring Grove, Pennsylvania, where he is the vice president of the American Society for the Defense of Tradition, Family and Property.