Mackinder Forum Seminar #30: David P. Goldman, “The Geopolitics of the U.S. National Debt”

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On Sunday, April 25, 2021, David Goldman presented a timely talk on “The Geopolitics of the U.S. National Debt.”

ABSTRACT: Senior Biden Administration officials are worried about the strategic implications of China’s digital currency, now in beta-testing for domestic use and under development for international transactions in a joint venture between SWIFT and the People’s Bank of China. In the narrowest application the digital yuan could help Russian, Iran and other countries evade American sanctions by circumventing the dollar-based banking system. But the digital yuan has even greater strategic implications.

Chinese analysts are predicting the demise of the dollar’s dominant role as a world reserve currency. On March 19, for example, Fudan University Professor Bai Gang told the Observer (, a news site close to China’s State Council:

Simply put, this year the United States has issued a massive amount of currency, which has given the US economy, which has been severely or partially shut down due to the COVID-19 epidemic, a certain kind of survival power. On the one hand, it must be recognized that this method…is highly effective…. The US stock market once again hit a record high.

But what I want to emphasize is that this approach comes at the cost of the future effectiveness of the dollar lending system. You do not get the benefit without having to bear its necessary costs.

A hegemonic country can maintain its currency hegemony for a period of time even after the national hegemony has been lost. After Britain lost its global hegemony, at least in the 1920s and 1930s, the pound sterling still maintained the function of the world’s most important currency payment method. To a certain extent, the hegemony of the US dollar is stronger than any currency before it.

…We see that the US dollar, as the most important national currency in the international payment system, may still persist for a long time even after US hegemony ends. Since this year, the US has continued to issue more currency to ease the internal situation. The pressure will eventually seriously damage the status of the US dollar as the core currency in the international payment system.

China’s financial markets, to be sure, are far too fragile and undeveloped to support the replacement of the dollar by the RMB. The Fourth Industrial Revolution based on Artificial Intelligence and Big Data, though, will also transform financial markets, possibly to the detriment of the United States. The international banking system now holds $30 trillion of offshore deposits, most of which are working capital for international trade. $16 billion of these deposits are in US dollars, and constitute an interest-free loan to the United States. Along with $8 trillion in foreign holdings of US Treasury securities, these deposits reflect seigniorage accruing to the US by virtue of the dollar’s reserve role.

The advent of Big Data in the management of inventory, trade and logistics makes it possible to replace traditional bank financing of international trade through bills of exchange accepted by banks, a system that remains basically unchanged since the 12th century. Control of production, storage and shipment through blockchain technology can drastically reduce the uncertainty of global deliveries and reduce the cash deposits required to finance trade. Huawei has made “smart logistics” a major line of business.

Electronic payment mechanisms can bypass the banking system. China in 2020 had $2.5 trillion in exports vs. $1.6 trillion for the US, and its weight in international trade could be reflected in international payments.

The question is not whether China will take over the role of the US and do what the US has done since World War II, but rather whether China will lead an AI revolution in logistics, trade, and Fintech.


David P. Goldman, “Digital Yuan Could Bust the United States,” Asia Times, March 21, 2021.

Joel Slawotsky, “Financial Hegemony: The Digital Yuan and Risks of Dollar De-Waponization,” Fordham International Law Review 44:1, pp. 39-100.

Saleha Mohsin, “Biden Team Eyes Potential Threat from China’s Digital Yuan,”, April 11, 2021.

BIOGRAPHY: David P. Goldman is Asia Times Deputy Editor (Business). Formerly he held senior research positions at Credit Suisse, Cantor Fitzgerald, and Bank of America, where he served as global head of debt research. He was a member of Institutional Investor’s All-America Team for securities research. During 2013-2016 he was a partner at Reorient Group, a Hong Kong investment bank. His firm Macrostrategy LLC advises institutional investors. Mr. Goldman is the author of several books, including How Civilizations Die (2011) and You Will Be Assimilated: China’s Plan to Sino-Form the World (2020). He has consulted for the Defense Department’s Office of Net Assessment and the US National Security Council. He contributes to The Wall Street Journal, Claremont Review of Books, Tablet Magazine, and numerous other publications.