A new economic order based on tangible assets and commodities will further erode the dollar's status as a reserve currency.

U.S. President Donald Trump has proposed providing Ukraine with permanent military aid in exchange for access to its abundant reserves of rare earths, essential elements for high-tech industries and defense applications. This proposal coincides with Trump's long-standing perspective of tapping foreign natural resources to offset U.S. military spending. Notably, in 2011 he criticized the U.S. strategy in Iraq, suggesting that seizing oil assets could have compensated the U.S. for its military involvement.

This type of in-kind payment is not without precedent. Historically, nations have engaged in similar arrangements, particularly related to oil. For example, during the 1980s, the United States entered into agreements with Middle Eastern countries, exchanging military support for favorable oil terms. In the current context, Ukrainian President Volodymyr Zelensky has expressed openness to this proposal, seeing it as a means of securing needed defense assistance while providing the United States with valuable resources. Challenges remain, however, as many of Ukraine's mineral deposits are located in conflict zones, complicating extraction efforts.

If realized, the agreement suggests a broader shift in the global economic landscape; one in which commodities and strategic resources are increasingly central to international trade and finance. The emerging order has been dubbed Bretton Woods III , in which nations seek alternatives to traditional fiat-based monetary systems by accumulating tangible assets and restructuring the dynamics of global trade. Unlike the original Bretton Woods system (1944-1971), which was based on fixed exchange rates and a dollar pegged to gold, Bretton Woods II (since 1971) has been characterized by fiat money and floating exchange rates. However, Bretton Woods III envisions a system of quasi-fixed exchange rates in which commodities play a more central role as economies intervene in foreign exchange markets to manage their currencies and maintain competitive advantages in trade.

Bretton Woods III

In the modern international financial order, emerging markets (particularly in Asia and the Middle East) accumulate large US dollar reserves and reinvest them in US assets, particularly Treasury securities. Conceived by Zoltan Pozsar, Bretton Woods III is a global order that emerges as a by-product of both persistent trade imbalances and the widespread destruction of fiat currencies. For decades, countries such as China, Japan and oil exporters have maintained undervalued currencies to sustain export-led growth. In doing so, these economies have become net lenders to the United States, effectively financing fiscal deficits and allowing prolonged periods of low interest rates. 

China is a clear example of an economy that actively manages its currency, the renminbi (RMB), intervening in foreign exchange markets to maintain a competitive advantage in global trade. The People's Bank of China (PBOC) frequently adjusts the exchange rate of the yuan through a combination of fixed exchange rates, capital controls and foreign reserve management, ensuring that Chinese exports remain attractive by preventing excessive currency appreciation.

The implications of the new global economic regime, even if partially realized, are profound. On the one hand, the previous system supported global financial stability by guaranteeing demand for US debt, which has allowed the United States to maintain sustained current account deficits for improbably long periods without fiscal stress. However, the trade-off has been the emergence of structural imbalances, and emerging markets have become dependent on U.S. monetary policy as the United States has become more dependent on foreign financing. Mutual dependence has given rise to a major risk: the possibility of a rapid and disorderly unwinding or even sudden collapse of the peg. Should foreign creditors lose confidence in the sustainability of U.S. debt or abandon the dollar in favor of alternative reserve assets, exchange rate volatility, capital flight and rapidly rising borrowing costs are likely to be reactions with broad repercussions for global trade and financial markets. Geopolitical tensions and rapid de-dollarization moves by major economies, such as the BRICS bloc, could accelerate this unraveling, resulting in a fragmented global monetary order in which multiple reserve currencies compete for dominance.

Another possible outcome of the Bretton Woods III order is the increasing role of commodities as a store of value and medium of exchange in global trade: a growing preference for external over internal money. As resource-rich economies and emerging markets seek alternatives to over-reliance on the dollar, gold, oil and industrial metals will increasingly play a role in reserve diversification and transaction settlement. Cryptocurrencies will do so as well. This shift has already begun, as seen in the expanded BRICS bloc's efforts to settle cross-border transactions in commodity-backed currencies or through bilateral trade agreements denominated in non-dollar assets. Central banks in China, Russia and the Middle East have been increasing purchases of gold, driving the price to record highs while signaling a shift toward tangible asset-backed reserves rather than the U.S. dollar and Treasuries. 

If this trend accelerates, it could lead to a multipolar monetary system, based on alliances or regions, in which commodities (including gold, among other things) will play a stabilizing role. Among the many consequences of Bretton Woods III is the serious weakening of the exorbitant privilege of the US dollar as the world's dominant reserve currency. 

Lines are already being drawn

If this international structure finally takes shape, the Trump administration's proposed deal (arms trade with Ukraine in exchange for rare earths) may end up registering as an early milestone in a broader shift towards commodity-backed transactions away from all-financial global trade. The European Union (EU) has a €900 million deal with Rwanda aimed at obtaining critical raw materials such as cobalt and lithium, essential for technology industries. That deal has faced criticism due to Rwanda's alleged involvement in the conflict in the Democratic Republic of Congo (DRC), where, on the other hand, China has solidified its influence through substantial investments in the DRC's mining sector. So far, the Chinese have committed $7 billion for infrastructure projects in exchange for access to the country's abundant copper and cobalt reserves. In another case, Turkey and Azerbaijan have strengthened their bilateral relations through trade in natural gas and strategic metals, enhancing their economic and geopolitical ties. A definite shift towards resource-based diplomacy is underway, with nations increasingly eschewing the role and values in favor of natural assets to forge alliances and promote strategic interests.

Transcendence

A shift to a financial order based on real assets may, after a period of time, significantly alter global power structures by elevating resource-rich nations while diminishing the influence of traditional financial centers. Countries endowed with vast reserves of oil, rare earths or significant and reliable agricultural production could see their geopolitical influence increase as physical assets increasingly become a basis for economic stability. A resulting shift could be the hoarding of critical resources as nations seek to control strategic materials in favor of exchange. In extreme cases, that development could escalate into resource-driven conflicts as states maneuver to secure deposits of high-value materials. In addition, bilateral and barter-based trade agreements could become more frequent, with nations exchanging raw materials directly for infrastructure, military aid or technological expertise rather than using dollar-based financial markets. (During the Cold War, in-kind payments between collectivist nations were common; sugar for oil between Cuba and the Soviet Union, for example). ) Such a realignment could weaken traditional financial centers such as New York and London, reducing their dominance in global capital flows. 

If fully realized, the Bretton Woods III paradigm could reconfigure the hierarchy of world powers, elevating smaller nations that possess disproportionately large resource reserves (such as Mongolia, which produces 99 percent of the world's terbium supply, or Namibia, the fourth largest supplier of uranium on Earth), provided their institutions are stable enough to capitalize on the new wealth. Conversely, countries that have historically maintained economic dominance through finance and technology, but lack natural resources or the will to acquire them, could become more midsized powers until they achieve stable supply chains for raw materials. Storage space and low shipping rates would become a new manifestation of capital sufficiency. A commodity-driven system could also redirect innovation, diverting investment from speculative technology and finance to energy optimization, materials science and supply chain resilience. Financial crises could evolve and take new forms, driven not by credit expansion but by supply chain collapses, extreme weather shocks or geopolitical embargoes that trigger cascades of instability. 

It is not inevitable that an order will emerge in which tangible assets (and not abstract financial instruments) define national economic security and influence. Decades of technological infrastructure, operating practices and human capital have built global financial markets, and they will not disappear overnight. But fiscal and monetary excesses, combined with the changing importance of previously overlooked resources, are giving way to Bretton Woods III in fits and starts. The latest phase of slow but steady de-dollarization may have come in the form of a U.S. president billing military arms shipments not for money, but for mining contracts leading to crates full of white, chalky, rapidly oxidizing metals.

Peter C. Earle, The Daily Economy