This article focuses on the role of the US dollar in global finance. Because the US dollar is the dominant currency in every industry, it is not possible to replace it with other assets, like gold or cryptocurrencies. The immediate threat is the war in Ukraine. However, more immediate risks could arise due to globalization, technology advancements, and a decline in trade frictions.
Most doomsayers ignore the very deep foundations of the dollar’s hegemony. Mark Sobel, a former senior Treasury Department official, notes that the dollar remains king because of the size of the U.S. economy, strong property rights, and the willingness of the United States to serve as lender of last resort in global financial crises. And while some observers believe that the dollar is on the verge of complete collapse in 2022, it’s a long way away.
The US dollar dominates every aspect of global finance
The US dollar’s dominance in global finance should not be taken for granted, as political scientists W. Kindred Winecoff and Aashna Khanna point out. The dominant position of the dollar is the result of its deeply embedded network structure in the global monetary and financial order. lån med sikkerhet bolig The rise of a new generation of digital currencies could change this trend. Likewise, changing consumer preferences and new products could shift the balance between costs and benefits. Despite these concerns, there is little evidence to suggest that technology will significantly alter the reasons for the dollar’s long-standing dominance.
Cryptocurrencies and gold are not viable alternatives
The US Dollar’s price is the key indicator of the economy’s health. Cryptocurrencies are emerging as a viable alternative to the U.S. currency. Gold and silver are valuable but not liquid enough to replace the dollar. Gold prices may plunge if investors sell large amounts. Both cryptocurrencies and gold are unstable, with a lack of full conversion to the U.S. dollar.
The war in Ukraine poses the most immediate risk
In the near future, the war in Ukraine could cause the entire dollar to crash. It is not clear how Russia can stop the war, but the main goal is to force Ukraine to withdraw from the Russian Federation and agree to a negotiated settlement. Hence, the West must ensure that Russia’s aggression fails and that the Ukrainians have the means to achieve their goal.
New technologies may enhance dollar dominance
U.S. dollar dominance has sustained its primacy, despite the threat of cryptocurrencies. The dollar’s size, depth, and stability are factors that have sustained its primacy for centuries. And because of these factors, the dollar’s use as a store of value and medium of exchange has continued to be favored by governments and financial institutions around the world. As proof of this, the dollar currently represents 60 percent of all official foreign exchange reserves.