The seventh and minor son of Lithuanian immigrants, Harry Dexter White, was a late flowering classic.
Orphan at an early age, White fought in World War I, and finally finished his doctorate from Harvard at age 40. In spite of the late beginning, White’s crowned performance reached the Bretton Woods conference when he managed to place the US dollar in the center of the international financial system of the Second Postal War. In the decades that followed, the dollar reigned supreme as the very basis of global finances.
This year, however, the dollar has suffered a decrease of almost 10 percent in value, which makes this the weakest yield of Greenback since 1973. At least for some, this decrease reflects a turning point, which marks the beginning of the end of the dollar era.
A deeper analysis of this depreciation of the dollar suggests that there may be some volition at stake. The important voices of the interior of the Trump administration, such as those of Stephen Look, have argued that the dollar is structurally overvalued, which makes US exports not competitive. To remedy this, Miran has proposed a summit, the so-called Mar-A-Lago Agreement, so that the United States can convince other important economies for depreciation in the dollar. Look also sent the idea of imposing a user rate on treasure holdings of foreign governments, another way through which the value of the dollar can be reduced.
In addition, President Donald Trump has pressed a lot for lower interest rates, calling the president of the Federal Reserve, Jerome Powell, “too late” for the supposed delay on his part. Trump has recently nominated to look at the Fed Board, in what seems to be an attempt to obtain lower rates as soon as possible. Trump’s visible frustration with Powell’s growing influence and looks inside the Fed shows that the lowest interest rates and, consequently, a lower dollar is around the corner.
Where Washington can turn a blind eye towards a blind eye towards the depreciation of the dollar, the domain of the dollar, a preeminent role in international currency transactions and foreign reserve holdings, it is something else.
In terms of domain, the dollar is an undisputed king, with approximately 60 percent of world official reserves in dollars, while about 60 percent of international foreign exchange loans and deposits are also called dollars. The United States remains the largest investment destination in the world, with FDI for a total of about $ 12.8 billion. At the same time, it seems that US policy formulators are willing to do everything possible to guarantee the domain of the dollar in the international financial system, especially due to the immense geopolitical leverage it offers.
At the moment, there is no true challenger of the dollar domain.
The United States has repeatedly frozen the assets of foreign governments called in dollars to force them to the negotiating table. In 1979, President Carter froze Iranian assets worth $ 12 billion to convince Tehran for negotiations. In later decades, sanctions have become a often used tool of the United States foreign policy. As the economic war becomes the new normality in the emerging global order, the success of the United States foreign policy depends on the domain of the dollar.
At the moment, there is no true challenger of the dollar domain. The United States offers a deep and liquid market for a unique more desirable asset, namely, the United States Treasury bonds. Neither the EU nor China have anything similar. Even if China tried to offer something, it would have to manage commercial deficits, something that goes against the growth agenda driven by export. At the same time, the significant peso of the US economy will guarantee the domain of the dollar since, according to the IMF, the United States constitutes 26 % of the world GDP in 2024, slightly compared to 25 percent in 1980, an impressive feat, especially with China’s growth during that time.
Even so, the reign of the dollar is not immune to bad policies. Although White played a seminal role, the dollar was destined to be dominant since the United States was economically the most powerful country at the end of World War II. During the following decades, the dollar also reached domain partly due to the high quality of US institutions, democracy, controls and balances, property rights, etc. With its strong institutions, the United States economic system was expected to resist extreme crises or ‘black swans’.
Now, however, there is the possibility that in the hurry of implementing its political agenda, the political leaders of the United States can end up committing a false country. Some analysts have seriously noticed that the so -called Overton window, or policies seen as acceptable, is expanding under the current administration.
Once considered unthinkable, public pressure on the president of the FED for lower interest rates, as well as the abrupt dismissal of the commissioner of the Office of Labor Statistics, have raised concerns about the holiness of US institutions. In a sense, this apparent indifference towards controls and balances has generated concerns about the future quality of US institutions and, therefore, the continuous domain of the dollar.
American policy formulators may also want to visit their random use again. The number of people subject to the sanctions of the United States increased from 912 to 2000 to approximately 9,400 in 2021. Such extensive use of sanctions can provide greater incentives for countries to diversify away from the dollar, especially when BRIC nations develop potential dollar alternatives in the future.
In general, the attenuation of the dollar domain may not be something bad. Financial stability can actually increase with more international currencies, providing more safe shelters during crises. In fact, the participation of the dollar in global reserves has gradually decreased during the last two decades, since the central banks have been changing.
King Dollar still governs global finances, but his crown is not impregnable. Strategic depreciation can help trade, but reckless policies and excessive use of sanctions risk weakening their reign. A future with rival international currencies can bring stability, but for now, the domain of the dollar endures while the United States defends the strong institutions that made it king.
The writer completed his doctorate in economics at a Fulbright scholarship.
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Posted in Dawn, August 25, 2025
