Most of the aid to Ukraine comes from the United States. Whether they can afford it is mainly related to their own currency.
A year ago, Putin attacked Ukraine, and one thing is certain: Russia would have won had the US not intervened and supported Ukraine. Europe alone would have been very weak.
The The numbers are very clear: The U.S. has so far provided almost 73 billion euros in support to Ukraine — half of all international aid commitments, including the EU’s. At first glance, it seems obvious that the United States should be involved. After all, they are a “superpower”, Europe is not.
But that leads directly to the next question: why isn’t Europe really a military superpower? 447 million people live in the European Union, and together they attract 15 trillion euros in economic output. Nevertheless, Europeans struggle to fund their defense budgets, while the United States invests 3.5 percent of its economic output in the military. This is much higher than the official NATO target of 2 percent, which EU countries have consistently missed for decades.
America can buy its massive military equipment because its dollar is the world’s reserve currency. As the later French president Guiscard d’Estaing complained as early as 1960, America was getting “too much privilege”: everyone wants dollars—but only America can print them. This automatically makes Americans richer because they can consume at the expense of the rest of the world.
The desire for the dollar has many faces. In many countries in South America and Africa, it serves as a de facto second currency as citizens want to protect themselves from domestic inflation. The U.S. Federal Reserve estimates that about $1 trillion moves abroad to serve as local currency: more than two-thirds of all $100 bills are not in circulation in the United States.
All countries prefer US dollars
The dollar also serves as the universal unit of account. Exporters around the world invoice their goods in dollars, even if they sell to a country other than the United States. The U.S. is involved in only 10 percent of trade deals — but 40 percent of global goods trade is denominated in dollars.
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Only those who hold dollars feel safe: Many central banks stockpile US government bonds so that they can protect their currency if international financial investors panic. Even poor emerging economies like Thailand are trying to run export surpluses so they can hoard dollars.
The consequences are very acceptable to America: they can live well beyond their means. Because other countries can only buy dollars by selling goods to the US, but vice versa they cannot import anything from there.
So America continues to owe the rest of the world – on a gigantic scale. The foreign trade deficit will be nearly $1 trillion in 2022, accounting for 3.7 percent of economic output. That’s more than the US spends on its military.
In fact, the US gets its military for free: they can buy their soldiers and weapons because they don’t have to avoid consumption, but are supplied by the rest of the world for free. The main currency, the dollar, makes the US a military superpower – and Ukraine is now benefiting from this. Or to put it another way: it’s not just America that’s helping Ukraine, but presumably the whole world.
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