Why growing threats to the US dollar are also rising threats to Americans

Op-ed views and opinions expressed are solely those of the author.

The Federal Reserve’s massive interest-rate hiking campaign to combat the inflation unleashed by President Biden has had countless implications across the global economy. While a steeper cost of debt financing for domestic corporations is one of the leading challenges, an emerging discussion regarding the dollar’s role in global trade gains traction. “De-dollarization” is increasingly bantered about across media outlets.

De-dollarization is predicated on the current trend globally to move away from the dollar as the world’s reserve currency. Over time, trading partners of these countries will pivot from relying on the U.S. dollar, and increasingly conduct trade in their local currency.

In the future, digital currencies will likely become the preferred medium of exchange as it gives the government unprecedented control and insight into how individuals and organizations use their capital. For now, though, the  Fed will continually seek to monetize U.S. debt with Congress continuously spending well in excess of the revenue it collects, leading to more calls by others on the world stage to reduce their reliance on the greenback.

Will China’s RMB emerge as the leading method of exchange?  Can the euro rise to prominence (not likely)? Or will the global economy turn more bilateral with each country only doing business in its currency? It’s hard to say, but I assert that the long-term tendency for a single currency to dominate for a period of 80-120 years probably only continues for a few more years.

The dollar has been the reserve currency since Bretton Woods 1 when the United Nations Monetary and Financial Conference took place in July 1944. If historical trends hold, then King Dollar’s reign may soon be over. With the worst presidential administration in office in modern polling history, one reckless decision after another by Biden’s handlers brings this day closer and closer to reality. Such a change would alter life in the U.S. as we know it.

I’m often asked what could cause the dollar to lose its esteem and  have a few thoughts:

1. Unsustainable debt.

Our country’s debt-to-GDP ratio soared above 130% during the pandemic. As it stands, we collectively owe well over what our economy is worth. Rising entitlement spending and little progress in establishing an annual balanced budget suggest the problem will only worsen. What’s more, the USA’s long-riding push to police troubled spots across the world only leads to more borrowing. I don’t see how that trend reverses without a draconian impact on Americans.

2. Rising interest rates on that debt.

Spending north of a trillion dollars annually is not much of a problem when financing costs are near zero. Now, however, with interest rates at 15-year highs, the cost of borrowing is immensely higher. According to the Treasury Department, the U.S. paid a record $213 billion in interest payments on the national debt in Q4 2022, up from just $63 billion in Q4 2021. My fear – which I believe will soon be shared by many economists and world leaders – is that the U.S. cannot be trusted to pay its financial obligations. And all it takes is the thought of financial instability to cause massive problems.

3. Combative sanctions on political opponents.

Before long, the world may just say “enough” to the U.S. enacting strict financial and trade-related rules on certain regimes. To be clear, we largely do more good than harm for the world, but many other leaders don’t feel the same. Sanctions on Russia, Iran, and Venezuela have had a knock-on effect of those countries seeking to reduce their dependence on the U.S. dollar. Moreover, the rise of neoliberalism and neoconservatism have seemingly joined forces to fund military initiatives. In the end, though, we end up capitulating to globalist forces – namely the WEF, WFO, BIS, and Trilateral Commission.

4. The possible end to the petro-dollar.

Recent financial partnerships and political dealmaking in the energy markets further undermine the dollar holding the reserve currency status on the global stage. Saudi Arabia and China are foes, not friends, of America, and they see an opportunity to take the global oil market from unipolar to multipolar. Additionally, other oil-exporting nations are pushing to take payment in local currencies, not dollars. De-dollarization is seen perhaps most clearly in how energy trading evolves.

5. Great power among BRICS Alliance.

China and Brazil have major influence over the financial construct of the oil markets. Just recently, Brazil President Luiz Inácio Lula da Silva urged developing countries to seek other currencies when conducting trade. Brazil also cut a deal with China to allow its exporters to take payment in RMB. This is yet another action that ditches the dollar as the primary intermediary. As BRICS countries grow, they will likely play an increasingly influential role in shaping the global financial system.

6. Our dependency on foreign energy to meet our daily food and pharmaceutical demands.

From 2016-2020, the U.S. found itself energy independent, both great for our economy and consumers, but most importantly, directly correlated with the strength of the US dollar. If a nation that is already crippled with debt is going to intentionally cut its markets off from some of the country’s most abundant natural resources, well that’s just flat-out ignorant on a scale we haven’t witnessed in the U.S. before.

We have sycophants in the U.S. Congress proposing 92 trillion dollar energy packages that not only have no backing in science or technology but would likely single-handedly cripple our country with widespread food and energy shortages, not to mention poverty for the next 50 years, while resulting in little to no change in CO2 emissions to the Earth’s biosphere.

I’m concerned about the dollar’s future. There are growing threats and emerging global players that seek to take down the greenback as the world’s reserve currency. Our government is not helping matters with its little regard for spending restraint. De-dollarization is happening, and it will only get more damaging to domestic markets if no smart strategic action is taken.

Joseph Gradante is the Founder and CEO of Allio Finance, a newly-launched platform that provides for sophisticated investing, made simple for young professionals with enhanced, fully automated investment portfolios. He has an extensive background in capital markets, having spent several years as a buy-side global macro strategist, sales trader, and private money manager.


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