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The decline of the dollar another pillar of the postwar order begins to crumble

Marxist Analysis · 2026-05-13

Core Argument

The article argues that Donald Trump's second-term economic programme — particularly his tax cuts, tariff wars, and the Section 899 "revenge tax" on foreign investors — is accelerating a long-term structural decline in confidence in US capitalism, its assets, and its currency. This is not merely a policy error but the latest phase in the erosion of the dollar-centred international financial system established at Bretton Woods in 1944. The central thesis is that US imperialism can no longer sustain its role as the guarantor of global monetary stability, yet no viable capitalist alternative exists to replace the dollar. The result is not a clean transition to a new order but a protracted, unstable period of economic balkanisation, intensified interimperialist rivalry, and heightened class struggle — a situation the article compares to the interwar years.

Theoretical Grounding

The analysis draws on Marx's theory of money, particularly its dual function as a means of exchange and a store of value, and the historical emergence of a universal equivalent under commodity-producing societies. This is extended to the international level: the capitalist world-system has an objective need for a single monetary framework, and the dollar has historically fulfilled that role not by choice but through the logic of "network effects" — a dialectical process whereby chaotic individual decisions converge on common standards.

The article situates itself within the Marxist tradition's analysis of imperialism, particularly the relationship between hegemonic decline and monetary instability. It draws implicitly on Lenin's theory of uneven development and the inevitability of interimperialist conflict, and explicitly on the historical pattern whereby organic crises of capitalism are reflected in crises of the prevailing monetary system — the collapse of the gold standard in the 1930s, the end of Bretton Woods in the 1970s, and the present decay of the dollarised system.

The concept of fictitious capital is deployed to explain the build-up of unsustainable debt and asset bubbles, while the analysis of Trump's "game of chicken" with the bond markets reflects a materialist understanding of where real power lies under capitalism: not with elected politicians but with the dictatorship of bankers and billionaires.

Conjunctural Relevance

The article was written in June 2025 and is anchored in very specific recent events:

  • Trump's 'big beautiful bill' : projected to add $2.4 trillion to US debt by 2034, pushing the debt-to-GDP ratio to 125 percent. This provoked a public split between Trump and Elon Musk, with Musk calling the bill a "disgusting abomination".
  • Section 899: a clause empowering the US government to impose a "revenge tax" on foreign investors, described as a form of capital control likely to scare international financiers away from US assets.
  • 'Liberation Day' tariffs: Trump's April 2025 tariff blitzkrieg against both allies and adversaries, marking the definitive end of the free trade era.
  • Market movements: the dollar down 10 percent since January 2025, at a three-year low; US 30-year bond yields above 5 percent; Moody's stripping the US of its triple-A sovereign rating.
  • Geopolitical shifts: Trump's threats to annex Canada, Greenland, and Panama; rapprochement with Russia; sidelining of European allies; uncertainty over NATO's future.

The article connects these immediate events to longer-term structural trends: America's share of global GDP falling from 35 percent (1944) to 26 percent (present), while China's rose from 2.5 percent to 17 percent; the dollar's share of global currency reserves declining from 73 percent (2001) to 58 percent; and the rise of Chinese competitors like DeepSeek and BYD in advanced industries.

Where the Argument Continues

The article leaves several questions open that are developed elsewhere in the IDOM corpus:

  • The mechanics of a potential dollar crisis: the article sketches scenarios (default, debasement, forced restructuring) but does not model the transmission mechanisms in detail. This is addressed in other IDOM pieces on financial crises and the 2008 precedent.
  • The Chinese alternative: the article notes the yuan's limitations (capital controls, lack of liquidity) but does not explore the strategic debate within the Chinese ruling class about internationalising the currency. This is taken up in IDOM articles on China's global role.
  • The European dimension: the euro's limitations are noted but not elaborated. IDOM's coverage of the EU's internal contradictions — particularly the German-French axis and the fragmentation of the single market — provides the fuller picture.
  • Class struggle implications: the article warns of austerity and social explosions but does not analyse the current state of the American working class, its organisations, or the balance of forces. This is the subject of ongoing analysis in Against the Stream and IDOM's coverage of US labour struggles.
  • The interwar analogy: the comparison to the 1930s is suggestive but not fully developed. IDOM's historical series on the Great Depression and the rise of fascism provides the necessary depth.

Connections

  • Lenin, Imperialism, the Highest Stage of Capitalism: the theoretical foundation for understanding interimperialist rivalry and the relationship between monopoly capitalism and territorial division of the world.
  • Marx, Capital Volume I, Chapter 3 ("Money, or the Circulation of Commodities"): the theory of money as universal equivalent, which the article extends to the international level.
  • Ernest Mandel, Late Capitalism: the analysis of the Bretton Woods system's collapse and the transition to floating currencies as a symptom of the long downturn.
  • IDOM articles on the 2008 financial crisis: the precedent for understanding how the US ruling class "kicks the can down the road" through state intervention and central bank support.
  • IDOM articles on the decline of US hegemony: the geopolitical counterpart to this economic analysis, covering the strategic retreat of US imperialism and the rise of multipolar conflict.
  • IDOM articles on trade wars and protectionism: the broader context for understanding Trump's tariff strategy as a symptom of capitalist decline rather than a solution.

Key Quotes

  1. "The US President promises to 'Make America Great Again'. On the whole, however, the capitalists do not trust that this will be the outcome of Trump's agenda."

  2. "The dollar's international status also confers on US capitalism (what bourgeois economists refer to as) an 'exorbitant privilege'... On every front, however, the US ruling class has abused these privileges."

  3. "The fact that the greenback's value is plummeting is therefore an indication that investors are now abandoning US assets, reducing demand for dollars."

  4. "The problem can be formulated very simply. On the one hand, there is an objective economic need for a world currency and financial safe haven. On the other hand, there is no viable alternative to the US dollar and treasuries, respectively, when it comes to fulfilling this role."

  5. "The dollar-centred global financial system was constructed over a period of 80 years. Furthermore, it was built and developed empirically, rather than consciously. Today, under capitalism, it has no alternative."

  6. "The only solution is a revolutionary one, aimed at toppling this entire rotten, dilapidated edifice."