Eswar Prasad
The U.S. dollar is the most easily recognized, widely accepted, and ardently desired currency in the world. It is also much reviled for the power it gives the United States over international affairs. Washington wields the dollar as a weapon against its rivals by imposing sanctions and freezing assets. Even U.S. allies chafe at their dependence on the dollar, which exposes their economies and financial systems to the vagaries of U.S. policies. The country’s rivals and allies alike thus want to end the dollar’s dominance. They are eager to promote alternatives, including their own currencies. And the United States is doing all it can to help them.
The U.S. economy is no longer the colossus it once was. Its public debt is gargantuan and rising, and policymaking in Washington is erratic and unpredictable. Persistent threats of debt defaults undercut the perception that U.S. government bonds are safe. Worse still, the bedrock elements of the dollar’s strength—the rule of law, an independent Federal Reserve, a system of checks and balances—have been undermined in recent years by populist politicians who have chipped away at the country’s democratic institutions.
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