Trump and Bessent Trash the Dollar

While Mark Carney has an alternative to the world’s reserve currency. Could it work?

It would be hard to describe Carney, who earned his stripes at Goldman Sachs, as a progressive. But the fact is this: he, until recently a conventional central banker, has promoted a radical alternative to the US dollar - and did so back in 2019. His proposal for a Synthetic Hegemonic Currency exposed how little debate there is within the economics profession (and indeed on the left) around the dominance of the US dollar. We should not be surprised at this neglect. As Rana Foroohar argued in her book Makers and Takers (2016), thanks to ‘mainstream’ orthodox, economics

financialization is the least studied and least explored reason behind our inability to create a shared prosperity.

Carney has argued that the world can build an alternative to the US dollar as the world’s reserve currency, and achieve a transformation of the international financial and monetary system. That could begin to end the imbalances caused by the dominance of the US dollar, inequality and resulting class wars and trade wars.

Trump’s moronic monetary policies

Trump knows nothing of monetary theory or policy. Yet, he and his Treasury Secretary are playing reckless games (yet another distraction from the Epstein files?) with the world’s reserve currency, and triggering stress across the system.

On the one hand Treasury Secretary Bessent boasts of a “strong dollar policy” - while on the other Trump and his economic adviser, Stephen Miran have set out to deliberately weaken the US currency , as I explained here. Confident of the power of the US economy and convinced the rest of the world has no choice but to back the dollar, they’re messing with it - and generating financial volatility and instability.

But the good news is this: they have reckoned without Mark Carney

Back in the day, in his role as the governor of the Bank of England, Carney proposed an entirely pragmatic alternative to the US dollar as the world’s reserve currency - he called it the Synthetic Hegemonic Currency (SHC). If he can build on the proposed alliance of ‘middle powers’ outlined in the Davos speech, he could use the SHC and his understanding of the monetary system to help

build a new order that embodies our values, like respect for human rights, sustainable development, solidarity, sovereignty and territorial integrity of states.

Below I outline his alternative to the US dollar, and suggest that it could lead to System Change. But first….

Global volatility and instability

Gold and silver prices have soared - and so has the value of the Swiss Franc, regarded by some apparently, as safer than the US dollar. At about the same time, the Japanese Yen slumped along with the mighty US dollar, even as the S&P 500 hit a new high this week.

A combination of fear and greed is behind the volatility. Those active in US stock markets are lusting after capital gains made from AI. Those active in global financial markets are fearful - and rightly so. The Global Casino is unstable - its foundations unbalanced, its activities volatile and its mafia boss - the President of the USA - highly suspect. And so capital is flooding into safe havens, in part because the US dollar - the world’s reserve currency - is not regarded as safe. As a WSJ editorial explains:

The WSJ Dollar Index, which compares the greenback to a basket of currencies, has fallen about 8% over the past year, and gold’s steady ascent, to above $5,300 per ounce this week, sends its own signal about dollar weakness. The dollar-euro exchange rate is among the most important in the global economy, and the greenback has lost about 14% of its value relative to the euro over the past year.

The second reason for global volatility is - ‘the system’ itself - as explained by Mark Carney in his speech at Davos this year. In a by now famous reference to the greengrocer’s removal of a sign indicating belief in the communist system, Carney went on to explain that people had lost faith in the so-called ‘rules-based’ system of globalisation.

The system’s power comes not from its truth, but from everyone’s willingness to perform as if it were true. And its fragility comes from the same source. When even one person stops performing, when the greengrocer removes his sign, the illusion begins to crack.

Carney is largely referring to the geopolitical system. But neither the geopolitical nor the financial system has been rules-based since Nixon toppled the Bretton Woods architecture in 1971. Delusion with the system and with American hegemony - “no longer works” said Carney

Let me be direct. We are in the midst of a rupture, not a transition.

Earlier, in 2019, Carney had argued that in a new world order, a reliance on keeping one’s house in order is no longer sufficient. The neighbourhood too, he argued, must change.

The Weakening US Dollar

As I explained back in March, 2025 in a post titled: Will Donald Trump Tame the Global Casino? - Trump’s team, while asserting the need for a strong dollar are in fact determined to weaken the dollar. Trump confirmed this week that that has not changed. As Bloomberg reported

President Donald Trump indicated he’s comfortable with the dollar’s recent decline, helping send the currency to its lowest level since early 2022.

“No, I think it’s great,” Trump told reporters in Iowa on Tuesday when asked if he was worried about the currency’s drop. “I think the value of the dollar — look at the business we’re doing. The dollar’s doing great.”

Why is a weakened US dollar making financial markets so nervous? Because the value of assets they own priced in US dollars, is falling. For example, the income-generating sovereign debts of the poorest countries are assets issued in US dollars and mostly held by international creditors. As the US currency weakens, so the cost of that debt (asset) falls for borrowers, while losses mount for the owners - their creditors. The same applies to the prices of other commodities fixed in US dollars, e.g: oil, gas and pharmaceuticals. As Carney once noted the US dollar is the currency of choice for at least half of all international trade invoices.

Second, a weakening dollar increases the cost of US imports for American consumers and could be inflationary. The Trump administration is relaxed about that because imports are a relatively small part of the US economy, and they believe, or hope, consumers will simply switch to cheaper American-made goods and services.

Third, Trump’s team is confident - as are all the major financial media - that the rest of the world has no choice. In their view there is no alternative to a weakened US dollar and so we should all put up and shut up.

To prove their determination, the US administration did something remarkable last Friday. It appeared ready to abandon the system of floating exchange rates (i.e. leaving the fixing of currency rates to ‘markets’) and instead chose to use the power of the state, to intervene. As the Wall Street Journal explains:

In recent decades, the U.S. has mostly taken a hands-off approach to the dollar’s relative value. But the Treasury Department has a tool at the ready, the roughly $200 billion Exchange Stabilization Fund, that it can use to buy and sell foreign currencies to influence exchange rates.

Last Friday the US administration did nothing more than announce that they were issuing a ‘rate check’ in relation to the Japanese Yen. Even without expending any of that $200 billion, the announcement was enough to frighten traders active in the US$/Yen market.

Floating exchange rates are one of the pillars on which the globalisatoin model is built. Removing that pillar was bound to rock the system.

Carney proposes an alternative to the US dollar as the world’s reserve currency

Back in 2019, Mark Carney made a speech at his very last meeting of central bankers gathered at Jackson Hole, Wyoming. He argued that:

The structure of the current international monetary financial system is making it increasingly difficult for monetary policy makers to achieve their domestic mandates to stabilise inflation and maintain output at potential.

Carney then went on to berate the views held by mainstream, i.e. neoclassical economists namely that:

these objectives are best achieved through operationally independent central banks adopting flexible inflation targeting and allowing their exchange rates to float.

That view rests on two pillars, he said. The first is that floating exchange rates are effective absorbers of global shocks, insulating domestic employment and output from developments abroad. He then criticised the insularity of the current system, and the failure of countries to cooperate and coordinate to maintain a stable international monetary system. The second mainstream pillar he argued, was

…that there are only modest gains from international policy cooperation and coordination in such circumstances. This long-standing and widely held view reflects the beliefs that any externalities that might exist are almost trivially small and that trying to address them would be fine-tuning to the nth degree.

That mainstream view is increasingly anachronistic, he argued, and then proposed a new publicly backed system. One based on gathering together a multiple group of countries’ reserve digital currencies inside one Synthetic Hegemonic Currency. That would increase the world’s supply of safe assets - and end reliance on the US dollar.

Carney argued that the Synthetic Hegemonic Currency (SHC) would be best provided and backed by the public sector, through a network of central bank digital currencies.

An SHC in the International Monetary and Financial System (IMFS) could support better global outcomes, given the scale of the challenges of the current IMFS and the risks in transition to a new hegemonic reserve currency like the (Chinese) Renminbi. An SHC could dampen the domineering influence of the US dollar on global trade. If the share of trade invoiced in SHC were to rise, shocks in the US would have less potent spillovers through exchange rates, and trade would become less synchronised across countries. By the same token, global trade would become more sensitive to changes in conditions in the countries of the other currencies in the basket backing the SHC.

Carney is exercising leadership, acknowledging ruptures to the system, and offering an alternative.

That should give us hope.

And apropos of hope: another emerged overnight from the musician and artist, Bruce Springsteen. Revealing that music and art can play a part in the education and agitation that leads to societal transformation, he shared his angry, uplifting and searingly honest “Streets of Minneapolis.”