Friday marked the 15th anniversary of Lehman Brothers filing for bankruptcy protection. In the past few years, the US has responded to the COVID-19 pandemic by implementing aggressive monetary and fiscal policies, driving inflation to a 40-year high. To ease the inflationary pressure, the Federal Reserve began a radical interest rate hike cycle in March 2022, which caused serious negative spillover effects on the world economy. Some non-US currencies depreciated sharply, emerging markets faced large capital flight, and many central banks were forced to raise interest rate.

For a long time, the US has used its dollar hegemony in the international monetary system to shift domestic crises and reap world wealth, undermining the economic and financial stability of other countries. When the US monetary policy is in the expansionary cycle, a large amount of capital flows around the world, boosting asset price bubbles and earning high value-added returns. When US monetary policy contracts, capital flows back to the US, leaving other countries to deal with the consequences of a sharp devaluation of their currencies and a collapse in asset prices.

Specifically, over the past year or so, the Federal Reserve has continued to raise interest rates, and this "strong contraction" has led to the demand for dollar assets such as US government bond, so that the US can absorb dollars at a very low cost. The scale of US government debt has been rising year after year. The solution is to monetize the debt, which dilutes the foreign debt burden by issuing large amounts of dollars. That is in essence to fleece other countries and force them to pay for the economic and financial problems of the US. Washington has also used the US dollar as a geopolitical weapon, imposing sanctions, freezing assets, blocking transactions and practicing long-arm jurisdiction against other countries.

It was the joint efforts of the international community to enhance coordination, improve financial regulation and promote reform of global economic governance since 2008 that prevented the global financial crisis from turning into a Great Depression for all. Now is time to strengthen collaboration in that regard for the same purpose.

XINHUA NEWS AGENCY