The Transition from Barter Trade to Impediments of the Dollar System: One Nation, One Currency, One Monopoly

Abstract

Before the invention of money (coin or paper) there was barter trading, a form of exchange without the use of a monetary medium such as coinage, paper money, or electronic cash (i.e. Bitcoin); Adam Smith (1776) described barter trade as primitive in his seminal “The Wealth of Nations” book. Since the 2008 global financial crisis, there has been an increase in barter trade by various countries that are; i) heavily indebted with insufficient foreign reserves; ii) imposed sanctions by the U.S. (i.e. Iran, North Korea, Russia, etc.); attempting to avoid the use of dollars in local, regional and international trade; iv) interested in reducing current account and trade deficits. With growing resistance to using US dollar in international trade by China, Russia, Turkey, Venezuela, Iran, North Korea, and Cuba; the question is how much longer can the US dollar keep its “kingpin” currency status? According to economist Jim O'Neill, not very long. The quick rise of Chinese economy and constant threat of Russia will challenge the dollar dominance, and maybe the latest theatrical trade war between the United States and China is the best or only response the U.S. was able to come up with.

Keywords: Barter Trade; Dollar Hegemony; Monopoly; Gold Rush; Sanction Power

JEL Classification: C52, C53, E37, E42, E44, E51, E59, G21, G28, G32