The Gold Standard, which supported the worth of national currencies, was replaced in global trading with the US dollar, as it was presumed to be the strongest currency in the world.
Not so the case now, with some Middle Eastern countries leading the chart. For instance; The Kuwaiti Dinar (KWD) is widely considered the strongest currency in the world. Its strength is attributed to Kuwait’s vast oil reserves and its stable, well-managed economy. A single KWD currently buys approximately $3.24 USD.
So what could happen now that the US has gone all out to disable the world economy?
1. Current Situation:
-
The U.S. dollar is the main currency for global commodities (like oil, gold, and agricultural goods) and most international trade.
-
Even when two non-U.S. countries trade (say Brazil and China), they often use the dollar for pricing and settlement.
-
Trade wars, especially involving tariffs and sanctions, disrupt global trust in U.S. trade policy and the predictability of using dollars.
2. If the U.S. Persists with Trade War Tactics:
-
Short-Term:
-
Increased U.S. Inflation: Tariffs on imports make goods more expensive domestically.
-
Global Recession Risk: Prolonged trade uncertainty can drag down global GDP.
-
Supply Chain Reconfiguration: Companies may avoid U.S. markets or find alternative routes to dodge tariffs.
-
-
Medium-Term:
-
Erosion of Dollar Dominance:
-
Other countries (China, Russia, EU) will accelerate alternatives to the dollar.
-
Petro-yuan (China’s oil trading in yuan) and euro-based commodities markets could gain traction.
-
Central banks diversify reserves away from dollars to other currencies (euro, yuan, gold).
-
-
Growth of Bilateral Agreements: Countries could increasingly trade in local currencies to bypass dollar exposure (already happening slowly).
-
-
Long-Term:
-
Weakening of U.S. Economic Leverage:
-
The U.S. ability to impose financial sanctions will decline if fewer transactions touch the U.S. financial system.
-
The U.S. Treasury market could see reduced demand, pushing up borrowing costs.
-
The dollar’s “exorbitant privilege” — easy ability to print debt and fund deficits cheaply — could fade.
-
-
Possible Power Shift: A more multipolar financial world could emerge, with competing reserve currencies.
-
Bottom Line:
If the U.S. persists with an aggressive, unpredictable trade war strategy, it risks gradually undermining the dollar’s status as the world’s default currency.
It won’t happen overnight — inertia favours the dollar for now — but over a decade or two, it could meaningfully shift economic power away from the U.S. toward a more multipolar financial world.
The US should be more worried about the potential Civil War; the philosophical mores pressed upon serving US military personnel will also weigh heavily on their conscience and willingness to comply.
It is not a brain fart I am having, again, California are seriously considering secession from ‘The Union’.
https://www.reuters.com/breakingviews/california-will-put-secession-back-map-2024-12-20/
World in chains no more? Maybe. I have more thoughts on this issue.
