The recurring financial violence of history

Just around this time last year, on April 13, I wrote in these columns that “there is a smell of gunpowder in the air.” That scent, which seemed like an “intuition” or a “warning” whispered into my ears by economic history at the time, has unfortunately turned into a war today that burns our throats and is determined to leave no stone unturned.

Our hope, of course, is that the ceasefire will turn into a lasting peace… However, big buts, ifs, and warnings follow immediately after.

The issue is not just border lines or strategic hills and ports. It is such a war that it is a war of hegemony that deeply affects the world's energy supply and will cause permanent damage to world economies, leading to crises such as inflation, stagflation, and recession. The issue is the strengthening of the shaken throne of the "reserve currency," which is the artery of the world system, or the emergence of new alternatives in its place.

Let's take a short excerpt from the article I wrote in 12 Punto on April 13, 2025, this time last year, and come to the present day.

“Trump is determined to end the neoliberal order with customs tariffs. Trust in the dollar is being shaken. The dollar's status as a reserve currency is being debated. The possibilities of China or BRICS countries creating a new reserve currency against the dollar are being discussed. The most important principle we should observe while discussing a new reserve currency should be this… Unfortunately, there is a smell of gunpowder in the air.”

Economic history shows us this very clearly. A change in reserve currency has never been just a matter of "preference." The power of a currency to be a reserve is not determined solely by interest rates or trade volume; it is determined by the persuasive power of the force that prints that money, and the navy and military hegemony behind that money. In fact, what we call the search for a reserve currency is a search for a new balance of power that has begun to change as a result of crises in the world.

Crises disrupt the balance of power, and a power struggle begins.

Power struggles lead to conflicts and wars.

The winner establishes the new monetary system.

THE FIRST GREAT CRISIS OF CAPITALISM

The 19th century and the beginning of the 20th century… The absolute dominance of the British Pound drew its strength from the gold standard and the navy of the empire on which the sun never set. The pawns of this power on the battlefields were the peoples of the countries under British colonial rule.

The first major crisis that capitalism entered is the crisis that began on the Vienna Stock Exchange on May 9, 1873, called the Long Depression, which lasted for 23 years until it eased in 1896. In the 1860s, Britain's share of world industrial production was 25 percent, but by 1913, it had fallen to 10 percent, while the share of the rising Germany had risen to 15 percent. Moreover, Germany had begun to make large investments in its navy to increase its dominance in distant seas. (How much it resembles today's US-China competition, doesn't it?)

These developments are among the real causes of the First World War. The British Pound is the reserve currency. Britain wins the First World War but borrows heavily from the US to finance the war. In 1931, the Pound abandons the gold standard. The reserve currency collapses. A new war will be required for a new reserve currency to emerge.

THE SECOND GREAT CRISIS OF CAPITALISM

The Second Great Crisis is the 1929 depression. After the First World War, capital and gold migrated to the US, and all asset prices formed a bubble. When the bubble burst in 1929, the crisis known as the Great Depression spread to the whole world. It is among the causes of the Second World War. Before this war even ended, the path for the dollar to become the reserve currency was paved with the Bretton Woods Agreement. With the end of the war, first the UN, then the IMF and the World Bank, and a few years later, NATO, the military power of the new reserve currency, the dollar, were established. Behind the dollar, just as in the early days of the pound, there was the gold standard. In 1971, the US abandoned the gold standard. As a result of the US's guarantee to protect Gulf countries in the Middle East and various agreements it made, oil prices began to be determined and sold in dollars. Oil-exporting countries invested their dollars in US bonds. Thanks to the Petrodollar system that came into effect in 1974, the dollar's status as a reserve currency still continues.

THE THIRD GREAT CRISIS OF CAPITALISM

Capitalism entered a new phase in the 1990s, turning into Neoliberalism. Very large income inequalities emerged between countries in the world and between classes within countries. The system entered a crisis in 2008. Although the crisis seemed to have eased in 2016, it has not been fully overcome. In addition to the system's crisis and loss of confidence, a competition similar to the UK-Germany competition in the First World War has emerged between the US and China in a much wider area.

The scenes we are experiencing today are the modern version of this historical rupture. It is also worth remembering this. Saddam's Iraq and Gaddafi's Libya, which brought up selling oil in Euros, were destroyed. Countries that attempted to disrupt the Petrodollar system were heavily intimidated. However, this system is also taking a hit today. Although the amount is small, countries like Iran and Russia, including Saudi Arabia, have started to sell oil in Yuan and Euros.

IS A TRANSITION WITHOUT GUNPOWDER POSSIBLE?

We hope that the third great crisis that capitalism has entered will end without leading to a major world war or catastrophe. But it seems that the formation of a new economic model and a new reserve currency will not happen without noise, commotion, or war.

The shaking of a reserve currency's throne is not just an economic loss for the power that prints that money, but an existential threat. It will be willing to try every possible way. If the subject is the reserve currency regaining its former power or the emergence of alternatives, or going even further, the creation of another reserve currency that will completely replace it, it means a power struggle that will produce war. Today, every event, from Trump's ambitions in Canada, Greenland, and the Arctic Ocean, to Lebanon and Ukraine, from the tension in the Taiwan Strait to the freight crisis in the Red Sea, is actually the labor pains of the formation of a new "power transfer and balance of power."

History repeats itself, but lessons are not entirely unlearned. According to defense and foreign policy analysts, the possibility of numerous regional conflicts is being discussed instead of a single, large war as in the past.

TURKEY IN SUCH PERIODS

Turkey's situation in such periods… That is a subject for another article. But let's give short headings.

There are geopolitical opportunities. However, dependence on foreign countries in the economy, vulnerabilities in the economy, demographic problems caused by the issue of migration and refugees, and polarization in politics and society bring very serious survival problems with them.

We were lucky in the First Great Crisis and war; we had Gazi Mustafa Kemal Pasha. While the Second Great Crisis was continuing in the economy but had not yet turned into a war, we still had Mustafa Kemal Atatürk. While the world economy was in collapse, we achieved a tremendous economic development miracle, especially starting from 1934. However, in the Second Great Global War, Atatürk was no longer there. We did not participate in the war, but in the world order that emerged after the war, especially starting from 1945, we abandoned Atatürk's principles and revolutions. We became a toy of US imperialism and NATO. Since that day, except for a few short periods, we have been in constant trouble.

We did not understand the value of the motto "Peace at home, peace in the world" and the saying "There can be no military and political independence without economic independence." We abandoned the principles of Gazi Mustafa Kemal Atatürk, the savior and founder of this country.