The status of the US dollar as the primary world currency and global reserve seems to be in jeopardy. The USD is being hit by major contenders across the globe, including the rise of local currencies overtaking its reserve prestige.
Once considered a robust asset, the US dollar has lost 25% of its purchasing power, indicating a loss of faith and connection of the currency with investors around the world. The currency is also crippling under pressure as rising debt metrics continue to erode the reputation of the US economy.
Amid such stark revelations, leading financial expert Amir Kumar Gupta has shared another update, adding that the USD’s status as a peak currency may decline over the next few years.
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US Dollar’s Prestige As Global Reserve Is In Danger
The US dollar is now standing at a precarious threshold. The currency faces major windfalls from all significant verticals, leading it to encounter serious value erosion. With the US debt amounting to $34 trillion, investors are now losing faith in the USD as a robust store of value, expediting its global demise.
Amit Kumar Gupta, a notable financial expert, took to X to share an update concerning the US dollar. Gupta shared that the USD is now facing an intense de-dollarization call, which may end its career as a robust store of value.
“There is not much consensus on this point, but a strong view is that the USD as a global currency may have peaked and could potentially see a steady decline over the next many years.”
Stating the reasons backing his bold claims, Gupta shared that the share of global trade invoiced in USD has steadily declined over the past few years. This led the USD to experience several setbacks and pitfalls in its wake.
“The share of global trade invoiced in USD terms and the USD reserves of global central bankers have witnessed a consistent decline in recent years.”
Gupta also stressed that the increase in cross-border flow of funds peaked in 2024. This resulted in the manipulation of the US economy and the USD as a whole.
“Moreover, the cross-border flow of funds from the US has witnessed a sharp rise in FY24. Unsustainable US public debt has led to a downgrade of the US sovereign rating outlook in 2023.”
The analyst later emphasized how the US-China trade conflict has significantly contributed to the loss of USD’s value and prestige.
“Besides, the trade conflict with China has led to a conspicuous shift of technological advantage from the US to China. These trends may consolidate the position of commodity-producing emerging economies, enabling them to seek favorable terms of trade.”
Consequences of American Currency’s Fall From Grace
If the USD loses its reputation as a robust store of value, it will indeed have a quite explosive impact on the overall US market. It could trigger a mass exodus of people shifting towards other asset alternatives to maximize returns.
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This could end up skyrocketing the price of gold, silver, and other precious metals, triggering an unhealthy equilibrium in the mix.
This can also pivot investor sentiment towards rival currencies such as Bitcoin and the Chinese Yuan, thereby boosting their prospects.
Inducing inflationary and geopolitical risks, the US needs to start treading on solid ground. It must strike a balance in its economic and administrative policies to re-establish long-term equilibrium.