The Unraveling of the Post-WW2 Economic Order and the Rise of a Reserve Currency \ stacker news ~bitcoin

Inspired from Jack Mallers recent twitter post🙏🏻

The global financial system that has governed the world for nearly 80 years is now breaking down. This system, established after World War II (WW2), was centered around the dominance of the US dollar as the world’s reserve currency. However, structural flaws, excessive debt, and changing geopolitical realities have made it unsustainable. As the United States attempts to restructure its economy through trade policies and currency devaluation, the rest of the world is actively moving away from reliance on the dollar. This essay explores the historical background, the problems with the existing economic order, the US response, the Federal Reserve’s role, and why a neutral reserve currency—potentially Bitcoin—may emerge as the foundation of a new financial system.

I. The Post-WW2 Economic Order: The Rise of the US Dollar

The Economic Landscape After WW2

At the end of WW2, the world was in ruins. The war had devastated Europe and Japan, leaving the United States as the only major industrial power still standing. Recognizing the need for global reconstruction, the US took charge, initiating efforts such as: • The Marshall Plan: A large-scale American economic aid program that helped rebuild Western Europe. • The Bretton Woods Agreement: A new monetary system in which the US dollar was tied to gold at a fixed rate, and all other currencies were pegged to the dollar.

Under this system, the US took on the role of the world’s economic engine. The idea was simple: • The US would buy foreign goods, run trade deficits, and send dollars abroad. • In return, other countries would accept the US dollar as the global reserve currency and hold US Treasury bonds as their savings.

This arrangement allowed for rapid global economic expansion. Countries such as Japan, Germany, and later China industrialized by producing goods for the US market. Meanwhile, the US continued printing dollars, and the world kept accepting them.

II. The Fundamental Flaws of the System

Despite its success in promoting economic growth, this system contained structural weaknesses that made it unsustainable in the long run.

Trade Deficits and Deindustrialization • Because the US was continuously exporting dollars while importing goods, it became increasingly dependent on foreign manufacturing. • Over time, US companies offshored production to take advantage of cheaper labor in China, Mexico, and other countries. • This led to the decline of US manufacturing and a shrinking middle class, as well-paying industrial jobs disappeared.
The Triffin Dilemma

The Triffin Dilemma explains why a country that issues the global reserve currency must run chronic trade deficits: • If the US stopped running deficits, there would be a dollar shortage, disrupting global trade. • If the US continued running deficits, it would hollow out its economy, making it less competitive.

This created a trap: The US had to either weaken its own economy or risk global instability.

The Unsustainable US Debt Problem • To sustain this system, the US borrowed heavily, leading to a national debt of over $35 trillion. • Foreign nations (especially China and Japan) bought US Treasuries (government bonds), effectively financing US overspending. • However, as US debt ballooned and inflation eroded the value of the dollar, foreign nations began questioning the wisdom of holding US assets.
The Rise of China and Global De-Dollarization • Over the past two decades, China has emerged as a manufacturing superpower, taking over global production. • BRICS nations (Brazil, Russia, India, China, and South Africa) are now reducing their reliance on the dollar. • Saudi Arabia, Russia, and China are settling trade in local currencies, reducing demand for US dollars. • Many central banks are dumping US Treasuries and accumulating gold instead.

This signals a shift away from the US dollar as the dominant global reserve currency.

III. The US Response: Re-Industrialization and Dollar Devaluation

As the world moves away from the dollar, the US must restructure its economy to remain competitive. The primary strategies involve:

Bringing Back Manufacturing (“Re-Industrialization”) • The US needs to rebuild domestic industries to reduce reliance on foreign production. • This is being pursued through tariffs on foreign goods, which force companies to manufacture in the US rather than outsourcing to China or Mexico.
Weakening the Dollar to Boost Exports • A weaker dollar makes US exports cheaper and more competitive in global markets. • This helps drive domestic production and job growth. • However, it also devalues US debt, making it easier to repay.

IV. The Role of the Federal Reserve: Trump vs. Powell

A major conflict is emerging between: • Donald Trump (and policymakers) who want a weaker dollar and lower interest rates to boost exports. • Jerome Powell (Federal Reserve Chairman) who has kept interest rates high to combat inflation.

Trump’s Strategy to Force the Fed’s Hand • Trump needs lower rates for his economic plan to work. • Since the Federal Reserve controls US monetary policy, Trump cannot directly devalue the dollar. • His solution? Tariffs and economic pressure to manufacture a financial crisis that forces the Fed to cut rates.

Eventually, the Fed will be forced to print more dollars, causing the dollar to lose value and accelerating the monetary reset.

V. The Shift Toward a Neutral Reserve Currency

As trust in the US dollar declines, the world will look for a neutral reserve currency. Historically, global reserve assets were backed by gold, but gold has limitations: • It requires trusted intermediaries for storage and settlement. • It is centralized, making it susceptible to manipulation.

Bitcoin as the Next Reserve Asset

Bitcoin offers a superior alternative to both fiat currency and gold: • Fixed Supply (21 million BTC) → No government can print more. • Decentralized → No central authority controls it. • Trustless, Digital, and Borderless → Unlike gold, it can settle transactions instantly and globally.

As nations lose faith in fiat currency, Bitcoin is emerging as the logical alternative for preserving wealth and conducting global trade.

VI. Conclusion: The Global Monetary Reset Is Underway

We are witnessing a once-in-a-century shift in the global financial system: 1. The WW2 economic model is collapsing. 2. The US is reshoring production and weakening the dollar. 3. Global de-dollarization is accelerating. 4. The Federal Reserve will eventually be forced to cut rates. 5. Bitcoin is absorbing the monetary shift as a neutral reserve asset.

This is not just another trade war—it is a global monetary realignment that will reshape the world economy for decades to come.