Investigative journalist Seymour Hersh’s story that the United States blew up the Nord Stream pipelines between Russia and Germany didn’t get much coverage in Australia, beyond the Biden administration’s strenuous denials.

It should have, and Henry Kissinger’s aphorism that “America has no permanent friends or enemies, only interests” should be pinned to Anthony Albanese’s wall.

We may never know for sure whether the US did destroy that pipeline, which hurt its allies in Europe as much as it hurt Russia, but it would confirm that America is pursuing the geopolitical contest with China and Russia with a ferocity that includes sabotaging the economies of its friends.

Another example of that was the pressure on Australia to ditch the submarines deal with France and instead buy American nuclear subs at a vast, destructive cost, both to the budget and relations with France (although we seem to have been granted a pardonné).

But now there are also signs of a shift in US currency policy.

As Paul Keating would say, the pet-shop galahs are all talking about “de-dollarisation” – that is, the demise of the greenback as the world’s reserve currency.

That is very unlikely, despite China’s efforts to bring it about. The US dollar remains pre-eminent in every way that matters – it accounts for 60 per cent of global foreign exchange reserves, and half of both currency transactions and debt issuance.

But a lower US dollar is not only likely, it’s already happening – the US dollar index has depreciated 10 per cent in five months.

That’s mainly because markets are selling it in anticipation of a recession and lower interest rates, but there also seems to be an element of the authorities letting it go as part of a geopolitical strategy.

Plan B

The rest of the world has not been quite as fawning as Australia, and America’s efforts to isolate China are not really working out as planned, so it has to try something else.

In the past few weeks, Saudi Arabia and the United Arab Emirates have defied the White House and made oil production cuts that will help Russia by supporting the oil price.

And the presidents of France and Brazil, as well as the prime ministers of Spain, Singapore and Malaysia, have all travelled to Beijing for friendly meetings with Xi Jinping. Those visits followed China’s success in organising a deal between Saudi Arabia and Iran to end the war in Yemen.

Chinese President Xi Jinping holds a welcoming ceremony for Brazilian President Luiz Inácio Lula da Silva. Photo: Getty

Brazilian President Luiz Inácio Lula da Silva’s visit was especially congenial and anti-American. Brazil’s leader said that his country wanted to work with China to “balance world politics” and accused America of “incentivising” the war in Ukraine.

Even Australia is working hard to re-establish full trade with China and mend the rupture that occurred when the Morrison government went a touch too far in its sycophancy to the US and offended China to the point of punitive tariffs.

So it may be time to bring out the big gun: Money.

America has always been proud of running a “strong dollar policy” and has used it for decades to reinforce its role as the world’s only superpower and the guarantor of the world’s financial architecture, as well as underwriting the trade surpluses of allies that have US military and/or spy bases, Germany, Japan, South Korea and Australia.

China has also been a massive beneficiary of the strong dollar, which has underpinned its industrialisation as well as a deep integration with America’s corporate world. But that’s now a problem – for both sides.

Part of China’s plan for global supremacy involves undermining the status of the US dollar and replacing it with the yuan where possible, something Brazil’s President Lula explicitly supported during his recent visit to Beijing, saying: “Every night I ask myself why all countries have to base their trade on the dollar.”

With Russia’s invasion of Ukraine and China’s support for it having confirmed that America and China are now effectively in a Cold War, the US is having to confront the fact that its economy is not only intertwined with Chinese manufacturing, it depends on it.

The Trump and now Biden administrations have been putting pressure on US companies to move their contract manufacturing away from China to other countries, and that has been working.

Supply chain diversity has become the name of the game, including in Australia, where companies are getting very worried about the growing tensions with China and talk of an invasion of Taiwan, especially after that recent series in the Nine newspapers.

Allow currency decline

A more effective way for the United States to compete with China would be to allow its currency to decline, and not defend it.

In fact, if the US really does believe it is heading for war, that becomes essential.

Modern wars are fought with machines and won by the country with the best industrial base, so the possibility of war with China demands that America re-industrialise its economy as quickly as possible.

The best way to do that, aside from tax breaks and moral pressure to entice companies to “onshore” their production, is to weaken the currency.

There is no sign yet of any official abandonment of the “strong dollar” policy, and a 10 per cent devaluation of the US dollar in six months is no more than a start, but there has been a change in the atmosphere around the greenback since the peak in October.

US market interest rates are falling as the economy slows in response to the rate hikes and after a few banks went broke in March and reminded us that financial crises always seem to start in America, the Federal Reserve returned to injecting cash into the system and increasing the supply of dollars.

Meanwhile two alternatives to the US dollar – gold and Bitcoin – are soaring. Gold is closing in on an all-time high and the price of Bitcoin is up 80 per cent this year.

So all up, it looks like the US dollar is heading lower, possibly much lower, which is bad news for the countries that benefit when it’s high … like Australia.

Alan Kohler is founder of Eureka Report and finance presenter on ABC news. He writes twice a week for The New Daily