The US dollar remains on a slippery slope as the conflict in the Red Sea is yet to be resolved. A US-owned container ship was struck by a missile attack off the coast of Yemen on Sunday. The anti-ship ballistic missile was launched from Houthi-controlled areas of Yemen, reported the US Central Command. The impact of the attacks has disturbed the free movement of commercial ships passing through the Red Sea.
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It Costs 4% of America’s GDP to Control the Sea Every Year
Mike Novogratz, the CEO of Galaxy Digital said that the US dollar has commanded the world’s reserve currency status for decades because America controls the sea. He explained that those who control the sea hold the power to become the world’s reserve currency, and that is bestowed upon the US dollar.
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Novogratz, also stressed that the US must always be the leader in the coming years in controlling the sea. However, that comes at a price as it costs the US 4% of its GDP to control the sea every year. Despite the cost, Novogratz said, that the US must never give up maintaining the movement of trade in the sea.
“The country that controls the seas has always been rewarded reserve currency status. It costs the USA approximately 4% of GPD to keep that rank. It gives us the benefit of borrowing endlessly at low rates. The actions in the Red Sea are very appropriate in this context,” he said.
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The impact of the attack on the Red Sea was clearly reflected in the US equities markets on Monday. The Dow Jones Industrial Index fell 118 points, while the Nasdaq barely ended in the green with 2.58 points yesterday. The US dollar index is now trading dangerously low at 102 points and an escalation could tank it below 100.