By Juliane Furno
The previous note in this series, “The Financial Leash,” followed the surplus that peripheral bourgeoisies refuse to reinvest and found it leaving the country, into dollar-denominated assets and the financial circuits of the centre. It closed by noting that, in a multipolar world where the dollar’s hegemony is no longer uncontested, the conditions for cutting that leash are more favourable than at any point since the 1970s. Juliane Furno takes up that question here. She reads financialization not as a technical deviation of contemporary capitalism but as a cog in the machinery of U.S. imperialism, reconstructs how the dollar’s architecture of power was built after 1971, and weighs, without illusions, the de-dollarisation strategies now under discussion within the BRICS and across the Global South.
The financialization of the world economy is neither a detour from contemporary capitalism nor a mishap that hijacked capitalism for finance's logic. Indeed, Marx himself, specifically in Volume III of Capital, describes what we now call the hegemony of fictitious capital and interest-bearing capital. The logic of financialization is therefore inscribed in the very logic of the capitalist mode of production.
Beyond being intrinsic to the capitalist mode of production, financialization, in the form it took from the late 1970s onwards, functions as one of the specific cogs of U.S. imperialism in its phase of super-imperialism, to use the term coined by Michael Hudson. In this phase, and above all after the end of dollar–gold convertibility in 1971, the United States won the “exorbitant privilege” of financing its twin deficits, fiscal and trade, with the savings of the rest of the world, without this costing it, in practice, any real adjustment. The world, and above all the periphery, came to finance the very power that subordinates it, in a perverse logic: to defend itself against the power of the dollar, it must accumulate dollars, and that accumulation ends up reaffirming the dollar’s primacy and its boundless power.
This machinery was not born fully formed, and it is worth reconstructing the concrete historical movement that built it. The Bretton Woods Agreement was fundamental in paving the way for dollar hegemony, but the American currency was still tied to its metallic backing and open to challenge from the other capitalist powers. In the 1970s, U.S. power faced serious challenges on at least three fronts, driving major changes in U.S. monetary policy and the logic of financialization that would intensify thereafter (Tricontinental, 2026).
The challenges came from the field of industrial supremacy, with competition from large Japanese and German firms; from the military sphere, with the U.S. defeat in Vietnam; and from the monetary field, with the exhaustion of the Bretton Woods dollar–gold standard. Washington’s response was not defensive but offensive. Nixon unilaterally broke the link to gold in 1971, shifting the cost of adjustment onto trading partners. Paul Volcker, at the head of the Federal Reserve, raised the benchmark interest rate from 11% to more than 20% between 1979 and 1981, drawing capital from the entire world into U.S. Treasury securities. The side effect was the debt crisis that would sink Latin America into the so-called lost decade, while the United States, at the same time, successfully brought its main competitors, Japan in particular, into line. Reagan then deregulated the domestic financial system, laying the foundations of what we now call financialization: the growing subordination of production, trade and national economic policies themselves to the flows and rules of dollar-denominated financial capital.
What financialization is, and why it deepens peripheral dependency
Before going further, it is worth being precise about what we are discussing. Financialization is not a synonym for “more banks” or “bigger capital markets.” Financialization is the inversion of command within capitalism itself. Under financial dominance, it is fictitious capital (shares, public and private debt securities, derivatives) that comes to command investment decisions, the pace of production and, to a large extent, the economic policy of states themselves. Financialization is the exacerbation of financial logic over productive logic, a logic that since the 1970s has been able to become relatively autonomous from the production of value.
Its mode of operation follows precisely from this inversion between production and financial appropriation. Fictitious capital does not need to pass through the production process in order to valorize itself: a share, a government bond or a derivative rises in price because the market anticipates future returns, not because anything more has been produced. This allows financial valorization to decouple, for a time, from real production, creating cycles of euphoria in which even industrial firms are drawn to channel their profits into financial investments rather than reinvesting them in production. The problem is that this decoupling is not permanent, since all value creation is the product of living human labour. In other words, sooner or later an economic crisis violently reconnects fictitious value to the value actually produced, and it is the real economy (employment, credit, activity) that pays the bill for the adjustment.
It is precisely here that the periphery finds itself further constrained by its dependent role. Peripheral currencies sit at the bottom of the international monetary hierarchy. They are not sought as stores of value but treated as risk assets, exposed to flows of speculative capital that come in search of yield and leave at the first sign of instability, domestic or external, real or merely perceived. To compensate for the exchange-rate risk built into their own currencies, peripheral countries are forced to keep interest rates higher than those of the central countries just to retain the capital they have already attracted, and to accumulate dollar reserves as self-insurance against sudden flight. In other words, the more financialized capitalism becomes, the more expensive it is for the periphery simply to remain standing within it.
Opening the capital account and integrating into international financial markets, as the Washington Consensus playbook prescribed, did not put the periphery on an equal footing with the centre; instead, it deepened its subordinate position. The periphery entered the era of financialization as a borrower in foreign currency, never as the issuer of the safe asset the rest of the world seeks. It also opened itself to volatile capital flows, never as a source of the liquidity that commands the system. That is why financialization, far from offering the periphery a route to autonomous financial development, tends to reproduce and deepen exactly the same hierarchy of power that subordinates it in the commercial and productive spheres.
An architecture designed to reproduce dependency
From the standpoint of the capitalist periphery, this architecture structurally organises our dependency. Because the dollar remains the currency of denomination for around 80% to 90% of commodity trade, from food to energy and minerals, and for nearly 90% of global foreign-exchange transactions, peripheral countries are compelled to seek U.S. currency constantly, simply to import what they need to consume and to produce (Tricontinental, 2026). This constant search for dollars makes us hostage to the monetary policy of a central bank that answers exclusively to the interests of the U.S. economy, but whose decisions, as became evident in 1979 and again in recent cycles of monetary tightening, spread as external shocks to the exchange rates, debt and employment of the entire Global South.
Over the past two decades, this monetary hierarchy has acquired an additional dimension, with payments infrastructure, especially the SWIFT system, and access to the dollar itself functioning as weapons of explicit coercion against those parts of the periphery that are not politically aligned with the United States. The seizure of the reserves of countries such as Russia, Venezuela and Afghanistan, the exclusion of banks from the international clearing system, and the ever-wider regime of unilateral sanctions show that financialization under dollar hegemony is not just one more among the many economic mechanisms of value extraction at work in the world market. It is also an instrument of direct geopolitical coercion, to which any country is exposed should it challenge Washington’s interests.
This hierarchy struck Latin America with particular violence. The “debt crisis” of the 1980s was neither a regional misfortune nor the result of fiscal mismanagement by Latin American governments, as conventional discourse insisted for decades. It was the direct, predictable result of a monetary-policy decision made in Washington to solve three American problems at once: inflation, the loss of industrial dominance to Germany and Japan, and the fragility of the dollar. The cost of that adjustment was shifted beyond U.S. borders. Governments that had borrowed in dollars at floating rates saw their debt service multiply overnight, without a single domestic economic policy having changed. The recessionary adjustment, privatisations and financial opening that followed, under the IMF’s baton, performed the same structural function as ever: recycling the savings of the periphery to sustain the centre.
A historical window, however narrow
As in the 1970s, the United States once again faces a simultaneous challenge on three fronts: military, with the limits exposed by the war in Ukraine; technological, with China’s rise; and monetary, with the proliferation of trade agreements in local currencies. The central difference from the earlier period is that today the challenger is not merely an industrial competitor, as Japan and Germany once were, but a power that combines economic, technological, military and political weight: China. Add to this the fact that the expansion of the BRICS and the United States’ increasingly indiscriminate use of sanctions are producing, as a side effect, exactly what Washington is trying to avoid: a political incentive for more and more countries to seek alternatives outside the dollar.
It pays to keep a sense of realism. Dollar hegemony will not be replaced by decree, nor in the short term, nor by any single national currency, including the Chinese renminbi. What is under construction is something more modest: a process of gradual erosion of the dollar as the hegemonic and, in practice, almost the only currency of the international monetary system.
Among the strategies now under discussion within the BRICS and other South–South initiatives, four deserve highlighting, in my view. The first is settling trade in local currencies, doing away with the dollar as a bridge currency. Trade between Russia and China, for instance, is already conducted almost entirely in roubles and renminbi, and trade between Russia and India is moving at a similar pace. The second is creating alternative international payment systems that can replace SWIFT for transactions between countries that today suffer, or fear, sanctions. The third is strengthening the Global South’s own financial mechanisms, such as the BRICS Contingent Reserve Arrangement, which today is underused and still partly dependent on IMF approval. This paradox must be resolved if this architecture is genuinely to offer an alternative to the Fund. The fourth, perhaps the most promising in the medium term, is the pricing of strategic commodities, such as grains, energy and minerals, in currencies other than the dollar, taking advantage of the fact that the countries of the Global South account for a significant share of world production of food, oil and critical minerals, yet continue to accept that their prices be set on commodity exchanges and in U.S. currency.
None of these initiatives, on its own, challenges dollar hegemony. Combined and sustained over time, however, they progressively reduce the structural dependence on U.S. currency that today constrains the room for manoeuvre in economic policy of virtually every peripheral country.
Two complementary initiatives also deserve mention. Russia has put them forward mainly within the BRICS, but they are of direct interest to the rest of the Global South. One is the creation of the bloc’s own reinsurance company, which could bypass the role European and American reinsurers currently play as a kind of informal “sanctions police,” denying cover to operations that displease Washington or its allies. The other is the proposal for a grain exchange among countries that together account for more than half of world production of soybeans, wheat, rice and maize, which would allow them to stop passively accepting that the prices of their own commodities be set in Chicago and in dollars. Both remain in the early stages of negotiation, but they point in the right direction: turning real productive power into an autonomous capacity for price-setting and financial protection.
Finally, I think it is important to state, and to keep restating, that de-dollarisation is not a problem of financial engineering, to be solved by specialists behind closed technical doors. Above all, it is a political struggle. It requires a willingness among Global South governments, historically accustomed to competing with one another for markets and investment, to cooperate, and the capacity to withstand pressure and retaliation from the United States. It is worth remembering that, judging by recent history, the greater the threats to U.S. imperialism, the more ready it is to confront them aggressively.
Understanding financialization as a cog of U.S. imperialism, and not as a technical inevitability of globalised capitalism, is the first step for peripheral countries to stop treating the international monetary architecture as an immutable fact of nature and to start contesting it as what it has always been: a terrain of power, built historically and, for that very reason, open to transformation through the collective political action of the Global South.
Juliane Furno is a professor at the Faculty of Economics of the Universidade Federal Fluminense (UFF) and a researcher at Tricontinental: Institute for Social Research.
Is my dollar worth anything five or ten years from now? What steps can I take to preserve my hard earned money to help with my retirement? I am already 69, how much should I be worried?
The US holds the world hostage.