Decades worth of work which kept the US dollar on a pedestal is being eroded not by manipulation, but by currency weaponization. The White House took sanctions too far despite emerging economies repeatedly calling out the weaponization of the currency. From Russia to Iran and Belarus, among other countries, the White House has sanctioned several countries. The move has crippled their economies bringing businesses and revenues to a standstill making it difficult to conduct financial transactions.
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The British pound, which was the global currency before the 1940s, had no such problem. While the British Empire was militarily powerful in terms of force, it barely weaponized its currency for trade and transactions. Only the US dollar is pushing its weight against other currencies despite being the widely used tender worldwide. Therefore, the world is now quietly moving on from the US dollar by simply diversifying its central bank reserves.
World Diversifying From the US Dollar
There is no doubt that the US dollar is still the most dominant currency in the world with 86% of transactions settled in it. However, trust in the USD is being eroded and it’s no longer the solution to every nation’s financial problems. In fact, the greenback has become a problem with its $36 trillion debt that threatens the economies of emerging countries.
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Its supremacy is being re-evaluated across the boardrooms of central banks where the heads are diversifying with gold and other leading local currencies. Another problem stems from the fact that the IMF and World Bank operate under the US dollar’s purview and framework. It gives no added advantage to other currencies making them remain second in line for decades.
The US must stop the weaponization of the dollar to regain the trust of developing countries. It also needs to help other nations rise up and not trample their respective economies. If the weaponization continues, the greenback could be on the path of decline much sooner than we know.