http://henryckliu.com/page3.html Liberating Sovereign Credit for Domestic Development

Liberating Sovereign Credit for Domestic Development

Any government printing its own currency to finance legitimate domestic needs beyond the size of its foreign-exchange reserves will soon find its convertible currency under attack in the foreign-exchange markets, regardless of whether the currency is pegged at a fixed exchanged rate to another currency, or is free-floating.  

Thus all non-dollar economies are forced to attract foreign capital denominated in dollars even to meet domestic needs. But non-dollar economies must accumulate dollars reserves before they can attract foreign capital.  Even with capital control, foreign capital will only invest in the export sector where dollar revenue can be earned.  But the dollars that exporting economies accumulate from trade surpluses can only be invested in dollar assets, depriving the non-dollar economies of needed capital in domestic sectors. The only protection from such attacks on domestic currency is to suspend full convertibility, which then will keep foreign investment away.   Thus dollar hegemony, the subjugation of all other fiat currencies to the dollar as the key reserve currency, starves non-dollar economies of needed capital by depriving their governments of the power to issue sovereign credit for domestic development.