The Dollar’s Dominance

Currency primacy in historical perspective

One of the mainstays of the global order for the past seventy years has been American economic leadership and the use of the US dollar as the core means of exchange, store of value, and unit of account. This global function has never been without difficulties—in the aftermath of Bretton Woods and the Nixon Shock, scholars like Robert Triffin and Susan Strange identified the domestic and international costs of dollar dominance. The debate reignited after the global financial crisis of 2008, with some scholars warning that increased politicization of the dollar may prompt a gradual transition into a multipolar global currency system, and others continually championing the dollar’s institutional strength and the absence of credible alternatives.

Recent geopolitical conflicts around the world have only exacerbated doubts about the future of American hegemony, including the future of its currency. Unpredictable political leadership, trade wars, and the eruption of armed conflict in Europe and the Middle East have heralded a new era for the global system and generated proliferating predictions of de-dollarization. All this has accelerated in Trump’s second term, which seems to be actively laboring to throw the status of the dollar into disarray.

The retreat from open markets, unpredictable fiscal policy, blustering confrontation with the Federal Reserve, and threats to reduce service on foreign holdings of US treasuries have all registered a significant departure from business as usual in Washington. An as yet speculative “Mar-a-Lago Accord,” devised by recent appointee to the Fed Board of Governors, Stephen Miran, sets forth an agenda to actively weaken the dollar in a bid to boost domestic manufacturing and reduce trade deficits. Though unlikely to come to fruition, its very articulation by those closest to the President stands as another threat to the credibility and reliability of the dollar.1 And with US military interventions causing more havoc in the global economy, the latest of which has prompted Tehran to all but close the Strait of Hormuz, questions of a new petro yuan or the introduction of a BRICS currency are gaining steam….

https://phenomenalworld.org/analysis/the-dollars-dominance/

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