US Undermines Dollar’s Reserve Currency Status Amid Legal and Global Financial Turmoil


The United States is chipping away at the foundations of the dollar’s status as the world’s reserve currency. This erosion has accelerated due to increasing sanctions, rising debt, and recent attacks on the rule of law following Donald Trump’s conviction.

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Originally, the dollar’s dominance stemmed from the US’s democratic principles, economic size, market depth, and institutional strength. However, the current political climate, marked by criticisms of the legal system post-Trump verdict, threatens these underpinnings. Florida Governor Ron DeSantis called the trial a “kangaroo court,” reflecting broader concerns about the politicization of the judiciary.

Simultaneously, the US has ramped up its use of sanctions as a foreign policy tool, which, along with soaring national debt, burdens foreign investors seeking safe markets. The expansion of sanctions—9,421 designations in 2021 compared to 912 in 2000—raises fears about the dollar’s reliability. The potential seizure of $300 billion in Russian assets further undermines trust in the dollar’s safe-haven status.

Despite these issues, finding an alternative to the dollar remains challenging. Attempts to reduce US exposure and enhance non-dollar trade flows in Asia and elsewhere have been slow. Even as central banks plan to increase their dollar holdings due to geopolitical tensions, concerns about US legal and financial stability grow.

Project mBridge, exploring a multi-central bank digital currency (CBDC) platform, highlights global efforts to diversify away from the dollar. Still, the dollar’s safe-haven appeal persists, partly because alternatives are not yet viable.

Overall, the US’s actions risk significant blowback, but the dollar’s dominance continues due to the lack of credible substitutes. The global economic landscape awaits to see how these dynamics will unfold.

By Naija247news
By Naija247news
Naija247news is an investigative news platform that tracks news on Nigerian Economy, Business, Politics, Financial and Africa and Global Economy.

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