The Importance Of The Dollar Remaining The Global Reserve Currency
It is critical for the US Dollar to remain the Global Reserve Currency. The Dollar is the most widely used national currency in the world. As a result, US dollars are accepted in every corner of the globe. This gives the US government, which controls the flow of dollars, a privileged place. We take the status of the dollar for granted, but if it were to change, we’d feel the effects immediately.
One of the main benefits of the Dollar being the Global Reserve Currency is that other nations will always be willing to buy US debt. This means that even as the US debt balloons over $30 trillion, America will not be hamstrung. Any other country with the debt of the US would be in big trouble. If the Dollar lost its Reserve Currency status, the quality of life of everyday Americans would immediately go down.
Having the Global Reserve Currency also allows the US to inflict heavy financial punishment on nations that do things America does not like. Withholding the flow of US Dollars to a country can severely hamstring a country’s economy. It allows the US, as a single nation, to exert more influence than an entire continent in many areas. America’s ability to exert such influence makes it more likely that other nations will do what it wants. Or at least makes the price for crossing the US steep.
The US Dollar is still dominant, but certain events are concerning. Nations, from Iran to Saudi Arabia, to Brazil, have recently made deals to trade more in Chinese Yuan. There is a fear that if enough countries become less tied to the Dollar, it could lose its Reserve Currency status. That is still a long way from happening, but should not be disregarded as impossible.
China is rising in all aspects of power and influence. They are trying to challenge the US’ hegemony. While I believe that much of their rise has been over exaggerated, they are providing an alternative to US dominance. Many nations are tired of American pre eminence and might naively see China as an opportunity to shake things up. It is important for the US to make keeping our influence around the world the key aspect of our foreign policy.
Obviously, doing that is easier said than done. It’s not as simple as making performative statements to this effect. The details of what needs to be done are nuanced and legion, and can be described further in another article. But one simple thing the US needs to do is make sacrifices to ensure the US Dollar stays the Global Reserve Currency. That means making deals that seem to give other nations a “win,” if it cements the Dollar’s status.
World influence and power can quickly shift based on trigger events. The US Dollar losing its Reserve Currency status wouldn’t trigger the end of American Hegemony, but it could be the opening that weakens it greatly. And the US Dollar is still pre eminent. But now, before its lead over other currencies starts to narrow, is when we need to take preventative measures. If we do, we will continue to reap the benefits of Global Reserve Currency status that we have for so long taken for granted.