Cop26 ends today (unless they extend it).
Last time I looked they were trying to agree wording on a draft deal so that next time around they can make an actual deal.
But China and Russia aren't there. And Greta is not impressed …
She calls Cop26 a "festival of greenwashing and blah, blah, blah".
She's probably right. But if Greta understood how much of the world's consumption is driven by the US-dollar based monetary system, she might start cheering for the end of that system.
What Goes Up Must Come Down
The US dollar-based global monetary system is on its last legs. And its failure could be painful and chaotic for hundreds of millions of people.
But in the short term, failure of the US dollar-based currency system is the quickest, big step to reach pollution reduction targets.
And in the longer term, the ending of the dominance of the dollar could lead to healthier, de-globalized, regional economies.
How we got here
At the end of World War 2, the US dollar became the world reserve currency. This started an era of American debt-fuelled consumerism, which put a rocket under the world economy.
There were others factors behind the increase in trade (like technolgical change), but a glut of US dollars greased the wheels.
As dollars flooded out into the world they bought Americans higher incomes and easy credit. This helped create a culture of consumption that other nations were keen to copy.
And it was a pretty good deal for everyone … At first.
But somewhere along the line, the dollar-based currency system starting driving consumption to levels that would not be possible under a less absurd system.
And increased consumption means more pollution.
This was all possible because world reserve currency status – and the petrodollar system – hugely overvalues the US dollar.
An overvalued dollar makes ‘stuff’ artificially cheap for those who create dollars and dollar derivatives.
This allowed banks on Wall Street and the City of London and beyond to emit ever expanding amounts of purely abstract currency tokens – which can be swapped for real stuff all over the world.
This system was close to failure in the late 1990s, until China was rushed into the World Trade Organisation to become the world's factory.
Asian economies re-geared to earn dollars, and this meant rich countries could offshore much of their manufacturing and polluting to the developing world. The result:
- In less than 20 years China overtook the US to become the world's #1 polluter.
- The most productive nations funded the US military, which pollutes than 140 countries combined.
- Consumption grew to 70% of the US economy, making the nation sick and unhappy.
What goes up must come down
This is a terrible system. And few (outside Washington and Wall Street) will miss it when it's gone.
The US dollar represents about 60% of global trade. This has been declining slowly, but that is accelerating.
And the loss of dollar purchasing power is plain to see.
The decline of the dollar is not being accurately reflected in official inflation stats, but people see what is going on.
Without the rocket-fuel of dollars, global consumerism can only decline.
We won't know until the aftermath. But I will be watching to see what percentage of global trade was credit-fueled over-consumption … I guess about half, but we'll find out soon enough.
But however much it is, we should see the end of the crazy business model of sending trinkets and knick-knacks across the world, then shipping plastic waste back to China, so that China can dump more plastic into the sea.
It will be rough.
But the demise of the US dollar as world reserve currency could be one of the biggest, fastest steps to reduce emissions and waste in the short term. Much more effective than all the hot air being emitted in Glasgow this week.
Superbubble will be tracking the breakdown of the currency system, and seeing if help Greta's dreams come true (in the short term at least).
x C x