Can the US dollar survive for long?

By RN Bhaskar

‘In 10 years, there will be no more Israel.’ — Henry Kissinger as quoted in https://nypost.com/2023/12/03/opinion/remembering-my-late-friend-former-secretary-of-state-henry-kissinger/

The US dollar is under siege.  And much of this is on account of three reasons

1. US debt has crossed $36 trillion, and threatens to increase by another $1.9 trillion this year (https://www.politico.com/live-updates/2025/01/17/congress/us-debt-limit-prediction-00198966).
2. Its continued shameless support to the wars in both the Middle East and Europe.
3. Its alacrity in weaponizing both trade and banking on account of which it has made the entire world suffer (free subscription — https://bhaskarr.substack.com/p/global-fragmentation-new-alignments).

The last point, about weaponising both banking channels and trade, is what has made the BRICS a lot more relevant, ever since the term was coined in the early years of this century (https://bhaskarr.substack.com/p/the-west-stumbles-brics-in-the-ascendant).

Is the Israel story over?

What is more interesting is that the legendary Henry Kissinger is reported (in September 2012) to have stated: “In 10 years there will be no more Israel.” In 2005 he said: “We will be going to war with Iran.” Both statements have been made by journalist Cindy Adams of the New York Post (https://nypost.com/2023/12/03/opinion/remembering-my-late-friend-former-secretary-of-state-henry-kissinger/).  This was also picked by the Israel Hayom (https://www.israelhayom.co.il/article/55883).  Today, some people close to Kissinger seek to deny that such a statement was ever made.

But the writing is on the wall. Israel is bleeding.  Without US support, it would have been declared bankrupt five years ago.  And its bleeding is draining the US as well. It is also a lesson that countries that use hatred to remain in power, eventually crumble.  It happened with Germany, with South Africa.  Now it could be Israel’s turn.

Watch how Israel’s trade balance has worsened.  And this is without considering various lines of funding that the US has permitted the Jews to fight their war against Gaza, Lebanon, Syria and even Iran (Israel is itching to provoke the US to launch a full-scale attack against Iran.  But the US is loath to take up such an adventure partly because of the formidable military of both Iran and Russia, as well as its unwillingness to get American boots on the Middle East soil.

In fact, Kissinger foresaw the trouble Israel would cause the US. In the “Kissinger Memorandum: “To Isolate the Palestinians”,” Middle East Report 96 (May/June 1981) – it can be found at https://merip.org/1981/05/kissinger-memorandum-to-isolate-the-palestinians/  — Kissinger tells Jewish leaders bluntly “Now Israel wants 2.6 billion dollars, but we have to ask for what? Where are we going to go from here? If the United States is seen as financing a Middle East stalemate with 2.6 billion dollars, the Arabs will turn back toward radicalism. Then you will have the Arabs putting oil pressure on the Europeans and the Japanese and eventually on the United States. At first Congress will be very tough. They will say we won’t yield to blackmail, but after five years, I ask you, will we be so tough? And when this situation comes and the Jews in America put themselves up as being the spokesmen for Israel, they will have to explain why the United States is in such a state.”

Since 1981, the Israel lobby has become hugely powerful as explained by John Mearsheimer in his article in February 2024 (https://www.newstatesman.com/the-weekend-interview/2024/02/john-mearsheimer-israel-ukraine-middle-east).  He also explains why Israel is in big trouble (https://youtu.be/kAfIYtpcBxo).

The dangers that lurk in the Middle East for both the US and Israel can be found in a brilliant commentary by a Lebanese journalists Ghadi Francis and Laith Marouf (https://www.youtube.com/watch?v=a2I8eucK4as).

The clock is ticking away.  Trump has some frightening choices ahead of him after he assumes charge of the President’s office on 20 January 2025.

Trump’s challenges

1. Trade and Commerce:  What has given BRICS a shot in the arm is the US approach to free trade and free banking transactions.  Sanctions, the expulsion of countries from the SWIFT system have compelled countries to think of an alternative – possibly a gold-backed alternative currency system (https://bhaskarr.substack.com/p/brics-gold-and-gdp). Can the US revive the authority of multi-lateral organisations?  Trump will have to work on that.
2. Trust – The US has broken so many promises, and let down so many friends, that nobody trusts the country at all. It has revived the old saying of Henry Kissinger: “It may be dangerous to be America’s enemy, but to be America’s friend is fatal.”   That could be a reminder for India as well. This is what Jeffrey Sachs also refers to when he says “I don’t trust the US at all (https://www.youtube.com/shorts/MZIpBtEOkqk).
3. Respectability: Post World War II, the US has been respected for its commitment to democracy, freedom of speech, and most of all respect for human liberties. All of them are being threatened.  For the first time, students at US universities protesting the Gaza genocide have been attacked, threatened, teachers expelled, and teaching sessions terminated.  This did not happen even during the Vietnam war. That admiration is under strain when votaries of free speech are attacked (remember the charges against Julian Assange (https://www.bbc.com/news/world-europe-11949341), and the co-owner of Telegram (https://www.youtube.com/watch?v=XH1-KjrdGzg)?    Ditto in the case of the way journalists Max Blumenthal and Sam Hussein where pushed out from the last conference held by Secretary Blinken – watch timeline 13:34 to 21:35 at https://www.youtube.com/watch?v=FIvIvtuJMfg.  All of these have shattered the myth that the US stands for justice and truth.
4. Culpability in abetting a massacre. None of the mass killings in the Middle East would have been possible without support from the US in terms of arms, intelligence and the support of media narratives.  Take for instance, the recent remark by Scott Ritter, when he says that Israel has killed more Israelis than Hamas did through the adoption of its Hannibal doctrine – watch timeline 9:35 to 10L:05 at https://www.youtube.com/watch?v=FIvIvtuJMfg.  The US brazenness in calling Israeli Prime Minister Netanyahu to address the US Congress even after he had been accused of genocide is testimony to the disdain that the US has for basic norms of respect for justice and life.  Consider just one example. The Iraq war was waged by the US even though there was no evidence of any weapons of WMDs or weapons of mass destruction.  Even though the US claims that only 35,000 people died, surveys by Lancet showed that more than 650,000 died (https://en.wikipedia.org/wiki/Lancet_surveys_of_Iraq_War_casualties).  A similar report titled “Study Claims Iraq’s ‘Excess’ Death Toll Has Reached 655,000 by Washington post can be found at https://swap.stanford.edu/was/20100122183142/http://www.washingtonpost.com/wp-dyn/content/article/2006/10/10/AR2006101001442.html.  Yet, George Bush was not declared a war criminal, though the West wasted no time in calling Russians war criminals.  More examples can be found in the deaths in Afghanistan, the Middle East and Ukraine. Of course, Western media does not like talking about this.  Consider for instance a recent statement from The Economist by its Asia correspondent Jeremy Page that he was surprised that India’s External Affairs Minister S.Jaishankar “refusal to condemn the invasion of Ukraine.” Had the journalist merely read the document NYET means NYET he would not have stated so, unless he was instructed otherwise by his management.  Do remember that on 1 February 2008, William Burns (then US ambassador to Russia, and currently director of CIA)  sent a highly classified cable to his government telling it “Nyet means Nyet” (https://wikileaks.org/plusd/cables/08MOSCOW265_a.html).  The cable was eventually made public by Wikileaks. It then was later picked up by Robert Wade who wrote in Le Monde on 15 March 2015 (https://eprints.lse.ac.uk/61428/1/Wade_Ukraine_crisis_is_not_what%20it_seems.pdf).  The narrative spun by western media to gloss over the killings allowed by the US in both Ukraine and the Middle East have hurt America’s reputation immensely.
5. Immigration – Trump may rail and rant against immigrants. But the fact is that the entire southern belt of the US wwhich depends on farm produce needs Mexican labour during sowing and harvest times.  The workers come, and after the work period is over, many of them return.  Putting a blanket ban will actually hurt the US.  So, while the US threat of imposing higher tariffs on BRICS members and other ‘errant’ economies might win voter support initially, the fact is that it will create all-round goods-inflation.    By banning immigration, Trump will cause labour inflation, which would mean more subsidies from the government, and hence more debt.  Already, Trump’s team has begun backtracking on the ban on immigration in respect of highly skilled people.  But the numbers and voters are in the South where migrants are needed. Trump will have to deal with that.
6. Reviving investments: US policies have made investment move to other parts of the world.  If the US must become a desired investment destination, it must learn to respect money and protect it, even if it belongs to a state or person, it does not like. Can Trump do that?  If yes, the US dollar has a chance.  If no, the dollar may have to yield to some other mechanism.
7. Reserve currency: No country has enjoyed an absolute permanent monopoly over its currency being the reserve currency.  The US dollar was strong.  But today it is weak.  Debt and US policies have made it weaker. A lot will depend on the way Trump manages his relations with respect to life, justice and investments.

One possible way is for the US to invoke the same principle that Henry VIII used to get his way (of course, at that time the issue was a woman). He could tell the Israel lobby that it must choose between loyalty to Israel or to the US. This includes allowing Gaza complete statehood. The alternative would be to invoke investigations against key members of the lobby, a kind of replay of McCarthyism that plagued the US once.

Or he could revoke all laws that make countries jittery.  That includes laws on trade and banking.

Can Trump do that?  Or will the US see another round of killings – this time over Greenland and the Panama Canal as well.

India will need to be wary of the US, and yet not remain an enemy. It means mending fences with China faster, as it will need the investments to create jobs.

Can India do that?  Or will it become another Ukraine for the US?

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Do watch my latest podcast on India’s property taxes at https://youtu.be/OSu5jzFlF8A

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