Reports of a falling dollar are greatly exaggerated. The shrinking of his share of the world’s foreign exchange reserves, coupled with growing geopolitical tensions, has sparked renewed talk of an end to his rule. In fact, its status as the backbone of the system has not wavered in the slightest. The enormous role played by the United States in capital markets, in trade and in debt strengthens this status of their national currency. Only if the global economy undergoes a complete overhaul will the dollar no longer be at the top. However, over-reliance on the US currency could destabilize emerging markets, dampen trade flows and trigger global capital outflows, such as in March 2020. This was due to the emergence of the dollar as the leading reserve currency after World War II. In 1971, US Treasury Secretary John Connally said, “The dollar is our currency and your problem.” In 2019, nearly 50 years later, Bank of England Governor Mark Carney echoed this. There are nominations for alternatives that include the Chinese Yuan and digital currencies.

The People’s Republic of China has long sought to promote the international use of its currency. His last venture was to pay oil exporters in yuan to expand their footprint. Meanwhile, some central banks argue that digital currencies can also be used as a way to create a more balanced global economy that is not dominated by any one country. The United States has forced the rest of the world to look for alternatives because they are using the dollar as a weapon against their opponents. After Russia invaded Ukraine, America and its allies froze nearly half of their $640 billion in foreign exchange reserves. The US has also targeted dollars held in Afghanistan, Iran and Venezuela, and banks that evade US sanctions face heavy fines. Advocates of regime change point to a steady decline in the dollar’s share of the central bank’s foreign exchange reserves. This has risen to around 59% in 2022, up from over 70% in 1999, according to the International Monetary Fund. Meanwhile, the Federal Reserve estimates that the U.S. share of world economic output has fallen from 32 percent in 1980 to 24 percent in 2020, while its share of world trade has fallen from 14 percent to 11 percent over the same period.

However, from a different perspective, the dollar’s grip on the world is stronger than ever. The dollar was on the same side in 88% of all currency markets last April, according to the Bank for International Settlements. The Fed estimated that between 1999 and 2019, the dollar accounted for 96% of trade tariffs in the Americas, 74% in the Asia-Pacific region, and 79% in the rest of the world. Banks used US currency for approximately 60% of all international deposits and loans. Finally, structural factors help. The US capital markets have both depth and liquidity to absorb the savings of developing and developed countries. Thus, income from the international flow of savings is processed into US assets.