In the midst of never-ending rumors and speculative headlines, the narrative of the US dollar’s imminent disappearance or death from global finance is far from reality. The truth lies in the numbers and trends that paint a picture of reality for US dollar dominance.
No one wants to witness the death of the fiat currency debt system more that I do.
Yet, pending any major existential event, such as BRICS launching an asset-backed common trade currency, the truth remains that nothing even comes close to the dollar’s supreme reign across the financial globe.
No sense in sticking one’s head in the sand in the face of facts.
As of now, here are the facts about why the US dollar remains the bedrock of the global financial system, debunking the myth of its rapid decline and death.
The Global Power of the US Dollar
The US dollar’s position as the global reserve currency is a testament to its unwavering strength. Accounting for nearly 60% of global foreign exchange reserves, the dollar’s massive footprint in the world economy is undeniable.
Despite a gradual erosion over 22 years, with a modest decline of 12%, global dollar dominance remains largely uncontested.
This gradual shift does not signal panic but rather a diversified global economy where countries continue to engage in trade using various currencies.
The USD is the Currency of Choice for International Debt
The preference for the US dollar extends beyond reserves to the markets for international debt.
The Federal Reserve’s collaboration with other central banks to establish Forex swap lines underscores the dollar’s pivotal role in stabilizing exchange rates during high demand periods.
This widespread use as the preferred currency for issuing foreign debt highlights the global financial system’s reliance on the dollar’s stability.
Dollar Dominance in Trade and Settlements
Trade relationships across the globe are predominantly denominated in US dollars, especially outside Europe.
This extensive invoicing in dollars facilitates international trade, including transactions between countries not involving the US.
Moreover, global claims and liabilities are more often settled in dollars, reflecting its preference over other currencies for financial settlements.
Global Dollar Demand and Usage
The dollar’s supremacy is further evidenced by its robust demand and usage internationally.
Ranking significantly ahead of the Euro, the second most used currency, the dollar’s demand for settling transactions and financing debt is unmistakably strong.
This prevailing preference underscores the considerable gap between the dollar and other currencies, indicating a slow and unlikely shift away from US dollar dominance.
Bottom Line: A Slow Dollar Unraveling – If At All (for now)
The notion of an imminent decline of the US dollar in global finance is not supported by the facts.
While the landscape of international finance evolves, the dollar’s dominance remains a constant, supported by its critical role in reserves, debt issuance, trade invoicing, and settlements.
Any potential shift away from dollar supremacy is not only gradual but also uncertain, reinforcing the fact of Dollar Dominance in today’s global financial system.
In the face of speculative ‘dollar death’ narratives, the data and trends speak to a reality of stability and enduring strength, ensuring the dollar’s role in the global economy for years to come.
Source reference: Markets & Mahem (X/Twitter)
