That Donald Trump is a narcissistic braggart was never in doubt, and was confirmed again with the delegates' ripples of laughter at his recent speech in the United Nations. The more intriguing question was always how would a lifetime businessman behave once he became president? We now have the answer: intense finance nationalism.
Much of the attention on Trump's posturing has been focused on his economic (as opposed to financial) nationalism, particularly the trade surplus with China. This is significant, but mainly for smaller economies like Australia, not the two giants in question. America and China are continental economies — trade is only on the margin — and they would not be greatly damaged by a sharp reduction in mutual commerce, at least in purely financial terms. The more significant question is how China will be affected if its systemic acquisition of American technology and knowhow is impeded.
Trump's weaponising of America's financial advantages is a more important and novel development. He seems to have concluded that financial war is more effective than military war. America's proxy war in Syria is close to lost, and the US is running out of countries to attack. Just the threat of bombing Iran would have catastrophic consequences, because it is likely insurers would refuse to guarantee the ships coming from the Persian Gulf through the Straits of Hormuz, imperilling about two fifths of the world's oil supply.
At a localised level the administration's use of finance as a weapon is becoming extreme. For example, Trump's bloodthirsty national security adviser, John Bolton, has threatened to freeze the US assets and impose a travel ban on judges, prosecutors, and staff of the International Criminal Court in the Hague because they have shown an interest in investigating America and Israel.
Asset freezes (which is really theft) have been used against Russians, Venezuelans, Nicaraguans and Turks. The Trump administration has threatened to freeze the assets of Cambodian President Hun Sen, and is contemplating doing so on Iraqi Prime Minister Haider al-Abadi because he has not been hostile enough towards Iran.
Trump's predilection for business thuggery has even been turned towards allies. When the Saudis failed to raise its production of oil, which led to prices being at a four year high, Trump tweeted that Opec 'must get prices down now!' by raising global output. 'We protect the countries of the Middle East. They would not be safe for very long without us, and yet they continue to push for higher and higher oil prices! We will remember.' All that was missing was: 'We know where you live — and where your family lives.'
This extraordinary behaviour reveals the state of mind of the Trump administration, which sees business-style standover tactics as a thoroughly good option. But it is the system-wide shifts that are more important and which may have a lasting impact.
"If these developments take hold, it could be the beginning of a genuine multi-polar financial world."
The United States has ruled the world for more than five decades because it has the globe's reserve currency: the United States dollar. Initially that was because oil was transacted in US dollars, but now it is because of the enormous growth of global finance. Daily trade in the US dollar is over $US4 trillion, much of it derivatives, such as interest rate swaps.
As economist Yanis Varoufakis has pointed out, Trump's strategy, using divide and rule tactics, seems to be to 'blow up existing multilateral conventions and build from scratch a new global order resembling a wheel, with America its hub and all other powers its spokes'.
As Varoufakis has also noted, America can do that because it has the world's reserve currency. It is why America can run massive budget deficits and not be penalised in the way that, for example, Argentina or Turkey are currently being punished (those countries made the mistake of having high debt in US dollars).
Power is more effective when it is hidden. Resistance is less likely if there is only a sketchy awareness of what is happening. Trump's leveraging of the US dollar — especially threatening penalties on companies that continue to trade with Iran — is bringing the US currency power more into the open and it has sparked a hostile response from the Europeans.
The US dollar-dominated financial system uses a transactional architecture called SWIFT for international transfers. The Chinese flagged that they would be setting up an alternative to SWIFT, called the China International Payment System (CIPS), but it is only in its infancy and the yuan remains fixed against the US dollar.
More significant is that the Europeans, furious at America's bullying tactics over Iran, are also working on an alternative to SWIFT to sidestep the US dollar-dominated payments system. If these developments take hold, it could be the beginning of a genuine multi-polar financial world. We could be witnessing the biggest financial shift for over half a century.
David James is the managing editor of businessadvantagepng.com. He has a PhD in English literature and is author of the musical comedy The Bard Bites Back, which is about Shakespeare's ghost.