The U.S.-led and underwritten crusade for a “rules-based international order” has been founded on the idea that the rest of the world would finance the venture by investing its savings in American debt instruments.

That “deal” has produced a dollar-dominated world economy where the U.S. owed $16.3 trillion to its overseas creditors at the end of last June. A part of that process is also that a quarter of the U.S. government debt ($7.3 trillion) is held by foreign private and official investors.

How much does all that matter?

Most of you will probably say – not much. After all, the dollar is still the world’s dominant store of value, accounting for 60% of all official reserve assets, and the greenback has no credible alternative as a global transaction currency for the foreseeable future.

That’s the way it is. But that’s only part of the story because the dollar is a key vector of U.S. economic and security policies upholding the “rules-based international order.”

Stop U.S. inflation with large energy supplies

The U.S., therefore, “owes” the rest of the world an economic system delivering stable prices, with a steady and balanced growth of demand, output and employment.

A tall order?

No, not at all. An independent U.S. Federal Reserve (the Fed) can do all that by strictly adhering to its charter mandate.

Here is an example: We are now witnessing a situation where the Fed apparently believes that it has to correct its decades old systematic policy errors of excessive credit creation by throwing the economy – a quarter of the global GDP – into a recession of an ex-ante unknowable extent and duration.

That’s a policy mistake that should never be repeated – and the U.S. Congress, enforcing the Fed’s charter, should never allow that to happen. And then the political strategists, with their exalted views of the “rules-based international order,” should also know that a sound and balanced economy is a foundation of such a global security architecture.

All of them should show contrition that the U.S. monetary policy is now creating a recession by fighting an energy driven inflation in a country that is by far the world’s largest oil and gas producer.

Indeed, how in the world is the U.S. going to compete with those kinds of policies?

Indiscriminate and pervasive trade limitations to punish and contain U.S. adversaries are no substitutes for effective measures of demand management that would lead the world to peace and prosperity of rising jobs and incomes.

Why is it so difficult to see that a 70% annual increase in the price of U.S. fuel oil is an abomination? Or that 20% price hikes of U.S. gasoline and piped gas services can be easily stopped and driven down with readily available and plentiful supplies.

Washington should stop the war in Ukraine

That would cut the U.S. consumer prices and reverse the second-round price effects in large retail and service sectors that directly depend on oil and gas deliveries.

And that would also moderate, or even halt, the race to keep increasing credit costs in a moribund U.S. economy, where demand in interest sensitive sectors like housing and consumer goods is literally collapsing.

The next question is: How is the U.S. helping its European friends and allies who are supposed to play a key role in defending the “rules-based international order?” The major E.U. leaders are complaining that they had to cut 40% of their energy supplies from Russian sources, and to damage their economies with panoplies of crippling sanctions.

As a result, the E.U. inflation soared to 11.5%, nearly tripling in the year to last October. Energy prices are now rising at an annual rate of 41.5%, and the trade bloc’s economy – accounting for 18% of world GDP -- has already entered an unstoppable decline.

This synchronized recession of the trans-Atlantic economy – representing 42% of world GDP – could engulf the rest of the world in a protracted period of cyclical downturn mainly because neither the U.S. nor the E.U. seem eager to stop the fighting in Ukraine.

With an astounding equanimity, the West is contemplating an uncontrollable military escalation, soaring energy and food costs, intractable recession and rising poverty in the middle of post-modern E.U. democracies.

The way out of this quagmire requires major economic and political changes.

First, Washington has to increase energy supplies to reverse its inflation pressures. That would make possible more supportive credit policies to avoid a long and deep recession.

Second, the U.S. should stop the fighting in Ukraine. That would restore E.U. energy supplies, slow down inflation and moderate the unfolding economic downturn.

Third, the U.S. must step back from a military confrontation with Russia and China in order to find a modus vivendi the rest of the world can follow and live with.