The appreciation of the U.S. Dollar against the currencies of all developing countries will not turn into a debt crisis like the one that started in Mexico and spread across many countries, including Russia and Turkey, in 1994. In other words, the rapid appreciation of the Dollar, particularly in the face of the currencies of developing countries, and the concomitant capital outflow from such economies, will not trigger a debt crisis for these countries. Quite the contrary, this situation should be analyzed as a development that will further deepen the crisis in the West and particularly in the U.S. Paradoxically, the appreciation of the Dollar out of economic rationalities makes the U.S. currency less reliable and the U.S. economy more problematic.
Interestingly enough, in 2009, just one year after the 2008 crisis, North Korea adopted rigid-enough policies to constitute a nuclear threat. Back in those days, everyone asked whether the crisis would be overcome with a nuclear threat or even with a partial nuclear conflict. However, North Korea's and subsequently Iran's nuclear threat against their neighbors extinguished by itself as a self-operating engine. But these intimidation tactics either dropped or deferred the risk of disposing of the Dollar and the U.S. treasury securities owned by countries that had foreign trade surpluses, including China and Russia. A similar operation is being conducted now.
In the summer of 2009, the U.S. Secretary of the Treasury, Timothy Geithner, commuted between the U.S. and China, with the intention of making China dispose of its dollar reserves in a more "conscientious" way. When his plane landed in Beijing on one occasion, Geithner said, "The economic leadership here [in China] has a very sophisticated understanding about where we are, and what we are doing. We are going to have to bring down our fiscal deficit, and walk back these extraordinary interventions in the financial sector, but we are completely committed to doing that - and they understand that." Geithner thought that China would be somehow "convinced," but the main problem was Russia. At the time, Russia announced that it would reduce its dollar reserve of $400 billion and its U.S. treasury securities of $135 billion. Geithner was right when he regarded Russia as the main problem. Russia was an economy which had smaller and weaker reserves than China, but it was not dominated by prevalent Western capital to the same extent as China. Russia's revenues and budget were based on energy - which is why it was so difficult for the West to abandon or threaten this country.
During those years, the U.S. could not yet fully recognize Russian President Vladimir Putin, who they thought was an ordinary representative of the oligarchy like Mikhail Gorbachev. Putin's threat to dispose of Russia's dollar reserves, which came before that of China, proved Putin to be quite a formidable politician and told us of the process that ended in the annexation of Crimea and the Ukraine crisis. At the moment, the Dollar and Euro are increasing in value against the currencies of all developing countries. This, undoubtedly, is a Dollar consolidation and an operation to maintain the life of the moribund Bretton-Woods system. But this operation, contrary to expectations, will not lead to a crisis in developing countries, including Turkey. Quite the contrary, such countries will take advantage of this operation to escape the neo-liberal policies that have thus far been imposed on them, and to switch to a new development paradigm.
Now, there is a very serious debate over economic policy in Turkey. President Recep Tattip Erdoğan proposes a "new deal" not only for Turkey, but also for all developing countries. Erdoğan's proposal of a new deal prioritizes an open economy and a new production-oriented development path. The basic characteristics of this model include allowing markets to operate in a more transparent way with regulatory and supervisory public institutions cleansing monopolistic elements in markets, paving the way for and supporting the private sector in leading technology-intensive industries, and improving the investment climate in these sectors.
The debate that has become a current issue with Erdoğan's proposal is also being held in the EU and the U.S. The main foci of these arguments are the European Central Bank (ECB) and the U.S. Federal Reserve. ECB President Mario Draghi and Fed Chair Janet Yellen think that they can overcome national and regional crises by getting out of existing neo-liberal policies - this is an objective evaluation that is far from their personal intentions and discourse. All along the line, Draghi wants the Eurozone to switch to an expansionary growth that which will support new sectors. Draghi and his team think that the resolution of the crisis by southern Europe, including Greece, which has become a political problem with the Syriza government, is possible by escaping the neo-liberal policies imposed by Germany. This is why this bloc yearns to switch to a low euro and expansionary monetary policy, and ultimately to a common fiscal policy that will complement this monetary policy.
When it comes to the U.S., the Federal Reserve's administration wants to hike interest rates as near as possible to the 2016 elections, with the aim of bringing a non-accelerating inflation rate of unemployment (NAIRU) in traditional sectors to a permanently reasonable level, and of bringing the U.S.'s foreign trade, budget, savings and investment deficits to reasonable levels via a competitive exchange rate of the Dollar. The political implication of this aim is the continuation of the U.S.'s global hegemony as based on information technologies, rather than on war.
In brief, the current appreciation of the Dollar is not a new wave of crises like that of 1994 for developing countries, but rather it will be an opportunity for them to climb out of crisis. This opportunity appears as a new deal for developing countries and the valuable Dollar is a serious crisis dynamic for the U.S. in the medium and long run.